Chapter 1:

INDUSTRY ANALYSIS: INSURANCE

History
Insurance contracts were invented in Genoa in the 14th century. The first known insurance
contract dates from Genoa in 1347, and in the next century maritime insurance developed widely
and premiums were intuitively varied with risks.
This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved
the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance
in India has evolved over time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the
Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three decades of the nineteenth
century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in
the Bombay Residency. This era, however, was dominated by foreign insurance offices which
did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and
London Globe Insurance and the Indian offices were up for hard competition from the foreign
companies.

In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life
business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to
collect statistical information about both life and non-life business transacted in India by Indian
and foreign insurers including provident insurance societies. In 1938, with a view to protecting
the interest of the Insurance public, the earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for effective control over the activities of
insurers.

An Ordinance was issued on 19th January, 1956 nationalizing the Life Insurance sector and Life
Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16
non-Indian insurers as also 75 provident societies 245 Indian and foreign insurers in all. The LIC
had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a
legacy of British occupation. General Insurance in India has its roots in the establishment of

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Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian
Mercantile Insurance Ltd., was set up. This was the first company to transact all classes of
general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of
India. The General Insurance Council framed a code of conduct for ensuring fair conduct and
sound business practices. In 1968, the Insurance Act was amended to regulate investments and
set minimum solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalization) Act, general
insurance business was nationalized with effect from 1st January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to nearly 200 years.
The process of re-opening of the sector had begun in the early 1990s and the last decade and
more has seen it been opened up substantially. In 1993, the Government set up a committee
under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations
for reforms in the insurance sector.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in
April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance
customer satisfaction through increased consumer choice and lower premiums, while ensuring
the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the
power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000
onwards framed various regulations ranging from registration of companies for carrying on
insurance business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies and at the same time GIC was converted into a national
re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.

Today there are 31 general insurance companies including the ECGC and Agriculture Insurance
Corporation of India and 24 life insurance companies operating in the country.

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There are two broad types of insurance:

 Life Insurance
 General Insurance` `

 Life Insurance:
Life insurance is a contract that offers financial compensation in case of death or disability.
Some life insurance policies even offer financial compensation after retirement or a certain
period of time. Life insurance, thus, helps you secure your family’s financial security even in
your absence.

You either make a lump-sum payment while purchasing a life insurance policy or make periodic
payments to the insurer. These are known as premiums. In exchange, your insurer promises to
pay an assured sum to your family in the event of death, disability or at a set time.

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 General Insurance:
A general insurance is a contract that offers financial compensation on any loss other than death.
It insures everything apart from life. A general insurance compensates you for financial loss due
to liabilities related to your house, car, bike, health, travel, etc. The insurance company promises
to pay you a sum assured to cover damages to your vehicle, medical treatments to cure health
problems, losses due to theft or fire, or even financial problems during travel.

 Types of General Insurance

You can get almost anything and everything insured. But there are five key types available:

1. Health Insurance
2. Motor Insurance
3. Travel Insurance
4. Home Insurance
5. Fire Insurance

 Motor Insurance

Motor insurance is for your car or bike what health insurance is for your health.

You can also get motor insurance for your commercial vehicles.

In India, you cannot drive or ride without motor insurance.

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Two key types are:

1) Car Insurance

It’s precious—your car. You paid lakhs of rupees to buy that beauty. Even a single scratch can
be painful, forget about bigger damages.

Car insurance can reduce this pain for a few thousand rupees.

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 2) Two-wheeler Insurance

This is your bike’s guardian angel. It’s similar to Car insurance.

You cannot ride a bike or scooter in India without insurance.

 Major Players In General Insurance Industry In India:

1. New India Assurance Company.

2. National Insurance Company.
3. United India Insurance Company.
4. Bajaj Allianz General Insurance Company.

Nature of Competition
Companies offering products and services in the general insurance market are believed to trade
under very competitive conditions. Under competitive conditions companies are forced to pass
on any increase in costs in prices and thus their revenues will rise, underwriting costs or other
expenses increase a firm operating under monopolistic competition responds to an increase in
marginal and average costs by increasing price and reducing output, resulting in a less then
complete pass-through in revenue; profit falls

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Particulars Investment Operat Balance Other Profit/ Profit/ Gross Net Net Expenses Combine
Income ing Investment Income/ (Loss) (Loss) Incurred retention of Mgmt. / d Ratio
allocated Profit Income Outgo Before After Tax Claims (NP/GDP Incurre NWP
to after (P&L Tax Ratio (%) ) - in d
Policyhold adjusting a/c) %tage
ers' fund allocation to Claims/
Policyholde NEP
rs' fund (%)
General
Insurers
Acko General (36.82 (33.50 (33.50)
) 303.8%
$$ 0.79 ) 3.33 - 40.1% 77.0% 76.7% 230.2%
587.6 708.6 473.00
Bajaj Allianz 93.8%
463.14 2 132.00 (11.00) 2 53.5% 70.5% 67.0% 21.2%
Bharti AXA 116.17 (7.93) 21.68 (10.41) 3.34 3.34 62.4% 65.6% 77.7% 33.3% 116.3%
DHFL (14.61 (10.31 (10.31)
) 58.7%
General * 4.44 ) 5.09 (0.79) 8.3% 66.9% 14.2% 52.9%
Future 80.23
105.70 22.42 (3.92) 71.08 103.1%
Generali 61.73 56.3% 69.6% 64.4% 34.2%
(115.7 (104.8
Go Digit # 4.15 12.28 (1.39) (104.97) 129.9%
4) 5) 32.2% 95.8% 74.7% 52.8%
HDFC ERGO 227.5 296.6
265.02 84.35 (15.22) 7 229.86 99.4%
($) 4 65.6% 46.4% 78.2% 27.5%
ICICI – 657.8 892.2 582.39
6 100.1%
Lombard 736.89 6 254.29 (19.89) 68.6% 61.3% 78.8% 19.8%
Kotak (21.03 (16.96 (16.96)
) 119.5%
Mahindra 7.67 ) 4.15 (0.08) 61.3% 90.2% 70.1% 41.3%
Liberty (36.12 (25.27
32.24 19.21 (8.36) ) (25.27) 108.4%
General ) 51.0% 84.3% 60.1% 36.9%
Magma HDI 39.94 6.48 7.21 (2.50) 11.19 11.19 66.6% 37.5% -9.3% 72.2% 64.8%
(1,019 (884.2
National 1233.73 115.96 19.49 144.7%
.70) 5) (884.25) 104.3% 68.2% 113.1% 26.8%
1,127. 963.82
New India 118.0%
1,972.25 30.16 1,094.85 2.82 83 91.7% 84.1% 93.2% 15.4%
(464.2 (131.5
Oriental 134.5%
1,342.71 9) 317.78 15.00 1) (129.00) 84.7% 80.2% 108.1% 20.6%
Raheja QBE 7.30 (7.32) 6.73 (4.00) (4.59) (4.46) 83.0% 90.9% 88.8% 33.9% 131.1%
Reliance 113.3
1 106.0%
General 280.59 81.50 52.97 (21.16) 113.31 55.2% 58.7% 85.3% 21.4%
Royal 101.1
105.8%
sundaram 147.93 66.24 41.74 (6.88) 0 67.31 73.5% 66.6% 83.9% 19.1%
190.2 255.5
SBI General 97.0%
152.63 5 66.34 (1.05) 4 217.06 71.1% 54.9% 76.7% 24.7%
Shriram 291.0 313.3
25.19 (2.93) 212.73 105.2%
General 342.48 7 2 68.1% 92.6% 89.0% 12.7%
132.5 191.4
Tata-AIG 102.6%
244.01 5 73.98 (15.09) 4 135.96 61.7% 65.9% 70.8% 29.9%
(1,917
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United India 147.4%
986.14 .15) 586.22 (98.92) .84) 4) 108.5% 84.9% 122.2% 19.7%
 Top 3 and Bottom 3 Players:

 Top 3:

1. New India Assurance Company. (Market Share 15.1%)

2. United India Insurance Company. (Market Share 11.5%)
3. National Insurance Company. (Market Share 10.9%)

 Bottom 3:
1. Go Digital General Insurance (Market Share 0.06%)
2. Raheja QBE (Market Share 0.06%)
3. DHFL General (Market Share 0.09%)

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In motor segment, 47% of the market share is controlled by four public players, with New India
Assurance alone having 15% market shares in fiscal 2017. Among other segments, New India
Insurance is the market leader in Engineering, Aviation and Liability segments with 21.9%,
29.6% and 18.2% market share respectively as of fiscal 2017. Market share of National
Insurance has declined from 15% in fiscal 2012 to 13% in fiscal 2017 but it remains the second
largest player.

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 Possible Classification Of Players:

 Leaders:

 New India Assurance Company

 United India Insurance Company
 National Insurance Company

 Challengers:

 Oriental Insurance Company

 ICICI Lombard
 Bajaj Allianz

 Followers:

 Tata AIG
 Reliance
 Star Health Insurance

 Nichers:

 Kotak General
 Raheja QBE
 Aditya Birla

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Positioning and Differentiation Strategies

1) Using Product characteristics or Customer Benefits as a positioning

strategy:

This strategy basically focuses upon the characteristics of the product or customer benefits. For
example, if I say imported items it basically tells or illustrates a variety of product characteristics
such as durability, economy or reliability etc. Let’s take an example of motorbikes some are
emphasizing on fuel economy, some on power, looks and others stress on their durability. Hero
Cycles Ltd. positions first, emphasizing durability and style for its cycle.

2) Pricing as a positioning strategy:

Quality Approach or Positioning by Price-Quality – Lets take an example and understand this
approach just suppose you have to go and buy a pair of jeans, as soon as you enter in the shop
you will find different price rage jeans in the showroom say price ranging from 350 rupees to
2000 rupees. As soon as look at the jeans of 350 Rupees you say that it is not good in quality.

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3) Positioning strategy based on Use or Application:
Let’s understand this with the help of an example like Nescafe Coffee for many years positioned
itself as a winter product and advertised mainly in winter but the introduction of cold coffee has
developed a positioning strategy for the summer months also.

4) Positioning strategy based on Product Class:

In some product class we have to make sure critical positioning decisions for example, freeze
dried coffee needed to positions itself with respect to regular and instant coffee and similarly in
case of dried milk makers came out with instant breakfast positioned as a breakfast substitute and
virtually identical product positioned as a dietary meal substitute.

5) Positioning strategy based on Competitors :

In this type of positioning strategies, an implicit or explicit frame of reference is one or more
competitors. In some cases, reference competitor(s) can be the dominant aspect of the
positioning strategies of the firm, the firm either uses the same of similar positioning strategies as
used by the competitors or the advertiser uses a new strategy taking the competitors’ strategy as
the base.

Branding Strategies
“Brand positioning is an act of designing the company’s offering and image to occupy a distinct
place in the mind of the target market. – Philip Kotler”

 The Problem Solver

Most of the brands focus on positioning their products as a one stop solution for a specific
problem. They pinpoint the pain areas and the challenges the consumers face in their
communication and other marketing strategies and mend it into promoting their product.

 Product Specific

Some brands which cater to different market segments, use product specific positioning
strategies where they position their different products differently than others.

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How to create a strong brand positioning strategy?
Before you decide your brand positioning, ask yourself these three questions.

 What does my customer want?

 Can I promise him to deliver it better and/or differently than my competitors?
 Why will they buy my promise?

 What does my customer want?

Not everyone in the market is your customer. You need to divide the market into ‘my customer’
and ‘not my customer’. This way, it’ll be easier for you to know what exactly is your customers’
wants are.

The division should be followed by you trying to be in your customers’ shoes. A good
businessman speaks in the voice of the consumer.

Your research should not be based on secondary data. You should go out and look for what the
customer actually wants, make the product fit those wants, and they’ll buy it.

 Be Better and/or Different

If it’s not just you who is in the market, you’ve got to find a way to deliver your promise better
and/or differently than your competitors. Make a brand which has a recall, which comes to the
customer’s minds when they hear about the particular product category or the feature you’re
offering. Every time I hear about girls being attracted by a deodorant, I get an image of Axe
deodorants in my mind.

 Give them a reason to buy your promise.

Your promise should be one of the factors they consider while buying the product. Use this trick

 Decide your product

 List its various characteristics
 Do a research, and
 Divide the characteristics into essential and add-ons.

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  Select only those categories, be it essential or add-ons, which customers consider while
making a purchase. (E.g. aesthetics, fragrance, taste, shape, cost, etc.)
 Find out what among these categories can you provide better than the competitors.
 Whatever you decide, don’t lose your focus from the essential characteristics. (E.g. Taste
will always be most important characteristic which a customer considers while buying a
food product)

PRICING POLICIES
The recent publication of Guiding Principles and Action Points for General Insurance Pricing
(GPAPs) by the ABI and BIBA, shortly after the Financial Ombudsman Service April Newsletter
devoted to general insurance (GI) pricing complaints, has once more placed GI pricing in the
spotlight. The Household Pricing Practices Review by the Financial Conduct Authority (FCA)
will provide further focus on this issue when its report is published later in 2018.

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Financial Ombudsman Service (FOS) setting policy on pricing

The April 2018 edition of ‘Ombudsman News’ contained a number of case studies about price-
related complaints. These provide a number of principles regarding what constitutes ‘good
practice’ in pricing and some of the factors to be taken into consideration when handling price-
related complaints. These principles include:

►Apparent acceptance in principle of firms offering new business discounts but an expectation
that the discount to be made up over five years.

►A recognition that premium calculations are complex, but an expectation that premium
increases should be calculated on a risk basis only, treating customers fairly in the process.

►FOS case assessments that take into account the individual circumstances of each case and
what the customer would likely have done (i.e., if they had been informed they could get cheaper
equivalent cover elsewhere).

►The FCA requirement, from April 2017, for insurers to take additional steps to encourage
customers to shop around at the fourth annual renewal of their policy, is a consideration in case
assessments.

►An increased consideration of, and making judgment calls on, the point at which a customer’s
vulnerability should have become apparent to the insurer (i.e., for purposes of assessing potential
detriment and calculating redress as required).

►An expectation that insurers should proactively spot the signs of customers’ inertia in relation
to price and to take action accordingly (i.e., by contacting the customer when customers do not
shop around or challenge renewal prices for prolonged periods of time).

►A potential good practice expectation that insurers will review premiums, if an ‘at fault’ claim
decision which impacts premiums at renewal (e.g., on a motor policy) is later overturned.

►A provision to challenge the fairness of broker commission charges (i.e., whether the charge
was justified and reasonable).

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Geographical Spread
 New India Assurance Company:

The company with its registered Head office in Mumbai has about 31 regional offices, 6 Large
Corporate Offices, 447 Divisional Offices, 578 Branches, 27 Direct Agent Branches and 1239
Micro Offices,1 Auto hub, 2 centralized legal hub totaling 2329 offices.

The company operates in 28 Countries as of 2015-16.

 United India Insurance Company:

Headquarter is in Chennai.

United India has 16385 nos. work force spread across 2248 offices providing insurance cover to
more than 10 million policy holders.

 National Insurance Company Ltd.:

Registered office is in Kolkata.

21 Foreign and 11 Indian Companies were merged with it and National became a subsidiary of
General Insurance Corporation of India (GIC) which is fully owned by the Government of India.

NIC's network of about 2000 offices, manned by more than 16,000 skilled personnel’s, is spread
over the length and breadth of the country covering remote rural areas, townships and
metropolitan cities. NIC's foreign operations are carried out from its branch offices in Nepal.
Befittingly, the product ranges, of more than 200 policies offered by NIC cater to the diverse
insurance requirements of its 14 million policyholders.

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  Go Digital General Insurance :
Registered Office at Pune. Another office is in Bangluru.
Mainly digital existence.

 Raheja QBE:
Raheja QBE General Insurance Company Limited, a joint venture general insurance company
promoted by Prism Cement Limited, India and QBE Holdings (AAP) Pty Limited, a wholly
owned subsidiary of QBE Insurance Group Limited, Australia has been registered as a General
Insurer under Section 3 of the Insurance Act, 1938 with the Insurance Regulatory and
Development Authority (IRDA). The Certificate of Registration (Forms IRDA/R3) has been
issued by IRDA on 12.12.08.
 DHFL General:
Registered Office is at Mumbai.
DHFL General Insurance Limited is a Public incorporated on 05 July 2016. It is classified as
Non-govt Company and is registered at Registrar of Companies, Mumbai. Its authorized share
capital is Rs. 5,000,000,000 and its paid up capital is Rs. 1,900,499,970. It is involved in
Insurance and pension funding, except compulsory social security.

 Key Factors Affecting Demand:

1. Financial pressures- drop in profit margin due to economic downturn

2. Permanent income and disposable income
3. Interest rate by bank and P.F.
4. Natural calamities
5. Insurance regulations
6. Tax incentives in terms of after tax cost of policies
7. Capital gain tax
8. Increase in household incomes leading to higher premiums
9. Degree of openness
10. Anticipate inflation rate and annual inflation rates
11. National brokers v/s independent agencies
12. Economic growth leading to higher premium as percentage of GDP
13. Anticipatory reform in health sector
14. Unemployment rate
15. Level of education and awareness

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Professional Trade Bodies of Industry
 American Academy of Actuaries
The American Academy of Actuaries represents and unites U.S. actuaries from all practice areas.

 American Association of Managing General Agents (AAMGA)

For 80 years, members of the AAMGA have been the leaders of the wholesale insurance market.
Their unique expertise is complemented by a foundation of integrity and professionalism, as well
as by the AAMGA's Code of Ethics to which each member annually subscribes.

 American Insurance Association (AIA)

The American Insurance Association (AIA) is the leading property - casualty insurance trade
organization, representing more than 450 insurers that write more than $115 billion in premiums
each year.

 American Society of Appraisers

The American Society of Appraisers is committed to fostering professional excellence in its
membership through education, accreditation, publication and other services.

 Canadian Life and Health Insurance Association Inc.

The Canadian Life and Health Insurance Association (CLHIA), established in 1894, is a
voluntary trade association that represents the collective interests of its member life and health
insurers.

 Council of Insurance Agents & Brokers

Represents over 300 commercial property and casualty agencies and brokerage firms in the
United States.

 CPCU Society
Founded in 1944, the CPCU Society's mission is to "meet the career development needs of a
diverse membership of professionals who have earned the Chartered Property Casualty
Underwriter (CPCU) designation, so that they may serve others in a competent and ethical
manner."

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 Group Underwriters Association of America
Membership organization which promotes the study, analysis and discussion of the employee
benefits underwriting industry.

 Health Insurance Association of America

An American health insurer, member-driven trade association whose focus is to shape and
influence state and federal public policy through advocacy, research, and the timely
accumulative analysis and dissemination of critcal information to its members.

 Insurance Bureau of Canada

National trade association that represents the companies which insure the homes, cars, and
businesses of Canadians.

 Insurance Information Institute

Information, analysis and referrals on auto, home, and business insurance.

 International Society of Appraisers

Provides, supports, and educates qualified professional personal property appraisers.

 Risk and Insurance Management Society, Inc. (RIMS)

Daily risk, insurance and benefits news, searchable databases, legislative updates, professional
advancement, student center, public record searches, much more!

 Society of Actuaries
The Society of Actuaries is a non-profit educational, research and professional society of
17,000+ members involved in the modeling and management of financial risk and contingent
events.

 Women in Insurance & Financial Services

Our Mission: To support, encourage and advance the success of women in the financial services
industry.

Business Functions Carried Out Online

 Buy/Renew policies online
 Online instalments
 Claims online
 growth opportunities for insure

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Chapter 2 – Promoters & Management Ethos
 PROMOTOR Group:

 ICICI:

ICICI Bank is India's second-largest bank. ICICI Bank offers a wide range of banking products
and financial services to corporate and retail customers through a variety of delivery channels
and through its specialized subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in
the United Kingdom and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri
Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab
Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK
subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange (BSE) and the
National Stock Exchange of India Limited (NSE) and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).

 Bajaj:

Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Finserv
Limited (recently demerged from Bajaj Auto Limited) and Allianz SE. Both enjoy a reputation
of expertise, stability and strength.

Bajaj Allianz received the Insurance Regulatory and Development Authority (IRDA) certificate
of Registration on 2nd May, 2001 to conduct various businesses (including Health Insurance
business) in India. The Company has an authorized and paid up capital of Rs 110 crores. Bajaj
Finserv Limited holds 74% and the remaining 26% is held by Allianz, SE.

As on 31st March 2018, Bajaj Allianz continues to be one of the most financially robust insurers
in the industry by maintaining its growth as well as profitability. The company has made a profit
before tax of Rs. 1,353 crores and emerged as the most profitable insurer recording a profit after
tax of Rs. 921 crores. The company reported a GWP of Rs. 9,487 crores, which has grown by
23.41% compared to the last fiscal year.

 TATA AIG:

Tata AIG combines the Tata group's pre-eminent brand strength and leadership position in India
and AIG's global presence as the world's leading international insurance organization.

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Tata AIG offers an extensive range of General Insurance covers that cater to various individual
and business insurance needs. Tata AIG has made a mark in the industry by launching several
innovative products and services over the years.

During the year Tata AIG registered a growth of 30% in Gross Written Premium (GWP) has
helped Tata AIG to continue to lead the market in its selected lines of business and maintain its
ranking as the fifth largest private sector insurer in India.

 Bharti AXA

About Bharti Enterprises

Bharti Enterprises is one of India's leading business groups with interests in telecom, agro
business, financial services, retail and manufacturing. Bharti has been a pioneering force in the
Indian telecom sector with many firsts and innovations to its credit. Bharti Airtel Limited, the
group's flagship company, is a leading global telecommunications company with operations in
20 countries across Asia and Africa. The Company ranks amongst the top 4 mobile service
providers globally in terms of subscribers

Other business ventures of the group include Bharti Softbank - a JV between Bharti Enterprises
and Softbank Corp - for mobile internet. Beetle Teletech, a group company, is India's leading
manufacturer and distributor of telecom and allied products.

The group has a JV "Field Fresh Foods" with Del Monte Pacific Ltd, to offer fresh and processed
fruits and vegetables in the domestic as well as international markets. Bharti has JVs with AXA,
world leader in financial protection and wealth management, for Life Insurance and General
Insurance. The group has presence in the retail sector through Bharti Retail that operates stores in
multiple formats. It also has a JV - Bharti Wal-Mart - with Wal-Mart for wholesale cash-and-
carry and back-end supply chain management operations in India.

 Royal Sunderam

Royal Sundaram General Insurance Co. Limited (formerly known as Royal Sundaram Alliance
Insurance Company Limited), is the first private sector general insurance company in India to be
licensed in October 2000 by the Insurance Regulatory and Development Authority of India. The
company was initially promoted as a joint venture by Sundaram Finance, one of the most
respected non-banking financial institutions (NBFCs) in India and other Indian Shareholders.

In February 2019, Ageas Insurance International N.V. acquired 40% equity stake in Royal
Sundaram after necessary Regulatory approvals from the existing Indian Shareholders.

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Consequent to this divestment, the stake of Sundaram Finance in our company is currently at
50%, Ageas Insurance holds 40% and the other Indian shareholders hold the remaining 10%.

Royal Sundaram has been providing innovative general insurance solutions to individuals,
families and businesses directly as well as through its intermediaries and affinity partners. The
company offers Motor, Health, Personal Accident, Home and Travel Insurance to individual
customers and offers specialized insurance products in fire, marine, engineering, liability and
business interruption risks to commercial customers. Royal Sundaram also offers specially
designed products to the small and medium enterprises and rural customers as well. The
company is a pioneer in bancassurace in India, having long-standing tie-ups with reputed banks
and NBFCs.

 CEO & KEY PEOPLE:

Bajaj Allianz CEO and MD – Tarun Chugh

TATA AIG CEO and MD – NEELESH GARG

ICICI GENERAL INSURANCE CEO and MD - Bhargav Dasgupta

BHARTI AXA CEO and MD - Sanjeev Srinivasan

ROYAL SUNDARAM INSURANCE - Mr Venkatasubramaniam

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 CSR & Ethics:
 ICICI Lambord:
Lombard – Employee Volunteering
At ICICI Lombard, we have continuously strived to go beyond our business focus and contribute
to further the well-being of all the stakeholders including the communities in which we are
present. We have taken multiple steps to meet this objective through specific initiatives in the
areas of Preventive Healthcare, Road Safety and Disaster support.

As part of our preventive healthcare agenda, we have successfully implemented projects in

coordination with ICICI Foundation in the tribal districts of Nasik to reduce newborn and infant
deaths. At the same time, we have been providing medical treatment and road safety training
facilities to over 20,000 truck drivers as part of our Road Safety initiative.

ICICI Lombard’s employee-driven CSR activities have reached out to underprivileged children
for five years in a row. Steered towards preventive healthcare, free eye check-up camps were
organised across the country for deprived children. In the last five years, ICICI Lombard has
reached out to more than 1, 00, 000 kids across 300 schools. With the company’s long-standing
commitment towards a better society and future for the country, ICICI Lombard is increasing the
scope of its activity with each passing year. Over the last 5 years, the initiative has reached out to
more and more students. Starting with 11,000 children in the first year i.e. 2011, the number of
children benefiting from the program touched 28,574 students in 2015 across 250 schools and
100 locations. The activity helped identify 4230 cases of poor vision that were provided with
corrective lenses free of cost. Over 2500 employees participated from various locations forming
teams that joined hands to plan and execute the entire activity.

Though the exercise involves sourcing higher-end equipment and specialist doctors i.e.
ophthalmologists, the employees successfully conduct eye check-up camps every year on
December 11, a day which has now been earmarked as the ‘Caring Hands’ Day at ICICI
Lombard. Around 50% of the employees participate every year which shows the overall
importance that the initiative has been able to garner within the company.

 Bharti AXA:

his is part of the week long CR programme. Employees enthusiastically participate in the CR
week Global challenge year on year to contribute to a greater cause and vision.

In 2014 and 2015 we stood second globally in the "Global Volunteering Challenge" which was
an effort to promote the culture of volunteerism for worthy causes amongst our employees. We
participated in the AXA Corporate Responsibility Week in June, 2014. The overwhelming
employee participation of over 85% ensured we finished as runners up amongst Global AXA
entities winning us a prize fund of INR 18 lakhs. This was contributed towards supporting
various projects helmed by Bharti Foundation.

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Bharte AXA General Insurance Company was awarded the Change maker Company of the Year
Award (2014 – Bronze) for Corporate Responsibility.

The Change Maker Company of the year is part of the Change maker - Corporate Responsibility
Awards instituted by Bharti Foundation. the philanthropy entity of the Bharti Enterprises. The
awards are to recognize efforts of Bharti Group Companies to integrate corporate responsibility
as an integral part of their everyday business. Amongst the five awards categories, Bharti AXA
GI won the most prestigious award of the evening, the jury assessed nominees on eight different
parameters ranging from the Company's Vision and its integration with Corporate
Responsibility, Social & Community Initiatives, Innovative use of Business products & services
and more.

Bharti AXA GI has consistently won this award for the second year for its year round CSR
efforts focused on the 3 pillars- Women and Children, Health & Education and disaster relief.

 Tata AIG:
The Corporate Social Responsibility (CSR) Policy (“Policy”) of Tata AIG General Insurance
Company Limited (“Company”) pursuant to Section 135 of the Companies Act, 2013.
The Policy serves as a governing document for deciding expenses to be incurred by the
Company for CSR activities. The said expenses are according to the said section and in areas or
subjects specified in Schedule VII of the Companies Act,2013 as amended from time to time and
pursuant to various guidelines / clarifications provided by the Ministry of Corporate Affairs
(“MCA”). The role of the Policy is to ensure that all future expense decisions are consistent with
the objectives and within the said framework.
Any deviation from the Board approved Policy requires the approval of the Board. The reasons
for deviations need to be adequately documented for obtaining approvals.

II. OBJECTIVES:
Although spending towards CSR activities has been mandated by the Companies Act, 2013, the
Company strives to be a responsible member of society and play the following role:

1. To pursue a strategy that enables realisation of the twin goals of shareholder value enhancement
along with contribution to society.

2. To align and integrate CSR programmes with the long term objectives of the Company (for example
spreading the cause of better driving habits aimed at reducing accidents)

3. To implement Social Investments / CSR programmes primarily in the economic vicinity of the
Company's operations with a view to ensuring the long term sustainability of such efforts .

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4. To contribute to sustainable development in areas of strategic interest through initiatives designed in
a manner that addresses the challenges faced by the Indian society especially in rural India.

5. To collaborate with communities, local bodies, corporates, group companies and institutions
that are supporting and implementing social and sustainable initiatives whether it be aimed
at creating employment, education, skilling work force, improving the health and safety
standards or the environment on the whole.

 Bajaj :
The Bajaj Group stands tall in the corporate world, with high ranking in terms of market
capitalization, turnover, profits, range of products and services and various other parameters. The
Bajaj Group believes that the true and full measure of growth, success and progress lies behind
balance sheets or conventional economic indices. It is best reflected in the difference that
business and industry make to the lives of people. Through its social investments, the Bajaj
Group addresses the needs of communities residing in the vicinity of its facilities, taking
sustainable initiatives in the areas such as health, education, environment conservation,
infrastructure and community development and response to natural calamities.

For society, however, Bajaj is more than a corporate identity. It is a catalyst for social
empowerment. It is the reason behind the smile that lights up a million faces. Its goodwill
resonates in the two simple words that live in the collective consciousness of Indians – Hamara
Bajaj.
Allianz is a global company that operates in more than 70 countries. Experience and expertise in
insurance and asset management make Allianz one of the world’s strongest financial
communities. Approximately 148,000 employees of Allianz do their utmost every day to make
the most of financial opportunities and assess and safeguard against risks both to the benefit of
our customers and to protect the company. Thanks to global reach, expertise and financial
strength, Allianz is a trusted partner for over 83 million customers insured by Allianz all around
the world. As a globally responsible citizen, Allianz takes its responsibility to society very
seriously. By offering skills, time and money, Allianz strives to advance social wellbeing in local
communities.
CSR activities will be undertaken directly or through a registered trust or a registered society or a
company established by the Company or its holding or subsidiary or associate company under
Section 8 of the Companies Act, 2013.

ii) If any donation/contribution is to be given to any other entity for CSR activity, preference will
be given to such entities/Trust having track record in undertaking similar programs or projects.

Indira Institude Of Management, pune Page 25

iii) Further, in such a case, the Company will specify the project or programme to be undertaken
through these entities, the modalities of utilization of funds on such projects or programs and the
monitoring and reporting mechanism.

iv) The Company may also collaborate with other companies for undertaking projects or
programs in such a manner that the CSR committees of respective companies are in a position to
report separately on such projects or programs in accordance with the prescribed CSR Rules.

 Royal Sundaram:
Royal Sundaram is committed towards improving the quality of the lives and safety of the people
living in our community. The Company aims to achieve this by working together with
Organisations, NGO’s and other agencies involved in social activities and who strive to improve
the quality of life in the fields of Road Safety, improving awareness in Education, Environmental
Protection, Health & safety and Community living.

As a responsible Company, it stands committed to the causes of Education, Environment, Rural

Health, Road Safely and Development. The Company also encourages and supports its
employees to take part and contribute their time, skills and resources towards the social causes
they feel passionate about. The Policy will also focus on carrying out such other projects and
activities falling within the purview of Schedule VII of the Companies Act, 2013 currently
notified and also those that may be included in future from time to time.
Eradicating hunger, poverty and malnutrition, promoting preventive health care and sanitation
and making available safe drinking water

(b) promoting education, including special education and employment enhancing vocation skill
especially among children, women, elderly, and the differently abled and livelihood
enhancement projects;

(c) promoting gender equality, empowering women, setting up homes and hostels for women and
orphans; setting up old age homes, day care centres and such other facilities for senior citizens
and measures for reducing inequalities faced by socially and economically backward groups;

(d) ensuring environmental sustainability, ecological balance, protection of flora and fauna,
animal welfare, agro-forestry, conservation of natural resources and maintaining quality of soil,
air and water;

Indira Institude Of Management, pune Page 26

(e) protection of national heritage, art and culture including restoration of buildings
and sites of historical importance and works of art; setting up public libraries;
promotion and development of traditional arts and handicrafts:

(f) measures for the benefit of armed forces veterans, war widows and them dependents;

(g) training to promote rural sports, nationally recognised sports, paralympic sports and Olympic
sports;

(h) contribution to the Prime Minister's National Relief Fund or any other fund set up by the
Central Government for socio-economic development and relief and welfare of the Scheduled
Castes, the Scheduled Tribes, other backward classes, minorities and women;

(i) contributions or funds provided to technology incubators located within academic institutions
which are approved by the Central Government;

(j) rural development projects

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Chapter- 3
External Environment
1. NEW ENTRANTS

Insurance companies have remained relatively constant. Most of them have been in business for
a good hundred years. Recently, however, there has been a rise in the number of new entrants
marketing, selling or servicing insurance products or providing new capital. A range of new
companies is coming in, redefining how insurance is done, and reshaping the economics of the
industry in the process.

Many of these new entrants are interesting organizations with great capabilities. Google, which
entered the UK market in 2011 as an insurance aggregator, is perhaps the most formidable new
entrant, from the perspective of a traditional insurer. The technology giant joined the emerging
insurance aggregation market, significantly disrupting competitive market conditions and, by
some accounts, subsequently helping lower insurance premiums by roughly 30% over the last 5
years.

2. SOCIAL AND ECONOMIC DYNAMICS

We’ve moved into a very low interest rate period, and those low rates are putting a lot of
pressure on the profitability of insurance companies. Insurance is an industry that, essentially,
takes in money and invests that money before subsequently paying claims. So, with lower
investment returns, there’s less profit being generated by the insurance sector.

And it’s a sector that doesn’t really generate a lot of profit to begin with. Over the last 30 years,
many U.S.-based insurance companies have failed to return their cost of capital. On top of low
interest conditions, there has also been a lot of volatility on those returns, especially since the
financial crash of 2007 and 2008.

On the plus side, insurers have rebuilt their balance sheets. However, market volatility makes it
much harder to run their business. It’s much more difficult to find stable, growing assets to
match against long-term liabilities, for example.

The most obvious societal shift, and one that is certainly impacting developed countries, is the
retirement of baby boomers. As they retire, they are taking money out of their accumulation
products to provide an ongoing source of income; trillions of dollars are going to flow out of
these products over the next 5 to 10 years.

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3. THE DATA REVOLUTION

Insurance companies have always made use of substantial amounts of data, but how they
leverage data is changing in significant ways. It used to be that, if an insurer had an efficient
operation and a large volume of risk data, it could find success by comparing, pooling and
underwriting similar risks. Now, data is everywhere. It’s pervasive, and it’s immediately
available. The whole concept of pooling risks may end up disappearing because, in effect, the
data revolution will actually enable insurers to underwrite down to the individual level.

4. THE DIGITAL MANDATE

The convenience and efficiency of online and mobile channels, coupled with the
commoditization of the core insurance product, has led insurance customers to seek a new
experience.

The digital insurance trend, then, is really about the way consumers will choose to interact with
an insurance company, as opposed to the way today’s insurance compa- nies try to dictate
interactions with consumers. Going forward, insurers will need to focus far more on the
consumer as an individual. In this environment, an effective omnichannel strategy will be key, as
will an insurer’s capabilities around self-service.

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Insurance Regulatory & Development
Authority
A. Organizational Structure of IRDAI:
Composition of IRDAI:

As per Sec. 4 of IRDAI Act, 1999, the composition of the Authority is:

a) Chairman;

b) Five whole-time members;

c) Four part-time members, (appointed by the Government of India)

IRDAI’s Head Office is at Hyderabad

All the major activities of IRDAI including ensuring financial stability of insurers and
monitoring market conduct of various regulated entities is carried out from the Head Office.

IRDAI’s Regional Offices are at New Delhi & Mumbai

The Regional Office, New Delhi focuses on spreading consumer awareness and handling of
Insurance grievances besides providing required support for inspection of Insurance companies
and other regulated entities located in the Northern Region. This office is functionally
responsible for licensing of Surveyors and Loss Assessors. Regional Office at Mumbai handles
similar activities, as in Regional Office Delhi, pertaining to Western Region.

B. Insurance Regulatory Framework:

1. Insurance Regulatory and Development Authority of India (IRDAI), is a statutory body
formed under an Act of Parliament, i.e., Insurance Regulatory and Development Authority Act,
1999 (IRDAI Act 1999) for overall supervision and development of the Insurance sector in India.

2. The powers and functions of the Authority are laid down in the IRDAI Act, 1999 and
Insurance Act, 1938. The key objectives of the IRDAI include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and fair premiums, while
ensuring the financial security of the Insurance market.

3. The Insurance Act, 1938 is the principal Act governing the Insurance sector in India. It
provides the powers to IRDAI to frame regulations which lay down the regulatory framework for

Indira Institude Of Management, pune Page 30

supervision of the entities operating in the sector. Further, there are certain other Acts which
govern specific lines of Insurance business and functions such as Marine Insurance Act, 1963
and Public Liability Insurance Act, 1991.

4. IRDAI adopted a Mission for itself which is as follows:

 To protect the interest of and secure fair treatment to policyholders;

 To bring about speedy and orderly growth of the Insurance industry (including annuity
and superannuation payments), for the benefit of the common man, and to provide long
term funds for accelerating growth of the economy;
 To set, promote, monitor and enforce high standards of integrity, financial soundness, fair
dealing and competence of those it regulates;
 To ensure speedy settlement of genuine claims, to prevent Insurance frauds and other
malpractices and put in place effective grievance redressed machinery;
 To promote fairness, transparency and orderly conduct in financial markets dealing with
Insurance and build a reliable management information system to enforce high standards
of financial soundness amongst market players;
 To take action where such standards are inadequate or ineffectively enforced;

5. Entities regulated by IRDAI:

a. Life Insurance Companies - Both public and private sector Companies

b. General Insurance Companies - Both public and private sector Companies. Among them,
there are some standalone Health Insurance Companies which offer health Insurance policies.

c. Re-Insurance Companies

d. Agency Channel

e. Intermediaries: which include the following:

 Corporate Agents
 Brokers
 Third Party Administrators
 Surveyors and Loss Assessors.

6. Regulation making process:

 Section 26 (1) of IRDAI Act, 1999 and 114A of Insurance Act, 1938 vests power in the
Authority to frame regulations, by notification.
 Section 25 of IRDAI Act, 1999 lays down for establishment of Insurance Advisory
Committee consisting of not more than twenty-five members excluding the ex-officio

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 members. The Chairperson and the members of the Authority shall be the ex-officio
members of the Insurance Advisory Committee.
 The objects of the Insurance Advisory Committee shall be to advise the Authority on
matters relating to making of regulations under Section 26.
 Accordingly, the draft regulations are first placed in the meeting of Insurance Advisory
Committee and after obtaining the comments/recommendations of IAC, the draft
regulations are placed before the Authority for its approval.
 Every Regulation approved by the Authority is notified in the Gazette of India.
 Every Regulation so made is submitted to the Ministry for placing the same before the
Parliament.

7. The Authority has issued regulations and circulars on various aspects of operations of the
Insurance companies and other entities covering:

 Protection of policyholders’ interest

 Procedures for registration of insurers or licensing of intermediaries, agents, surveyors
and Third Party Administrators;
 Fit and proper assessment of the promoters and the management
 Clearance /filing of products before being introduced in the market
 Preparation of accounts and submission of accounts returns to the Authority.
 Actuarial valuation of the liabilities of life Insurance business and forms for filing of the
actuarial report;
 Provisioning for liabilities in case of non-life Insurance companies
 Manner of investment of funds and periodic reports on investments
 Maintenance of solvency
 Market conduct issues

C. Supervisory Role:
1. The objective of supervision as stated in the preamble to the IRDAI Act is “to protect the
interests of holders of Insurance policies, to regulate, promote and ensure orderly growth of the
Insurance industry”, both Insurance and Reinsurance business. The powers and functions of the
Authority are laid down in the IRDAI Act, 1999 and Insurance Act, 1938 to enable the Authority
to achieve its objectives.

2. Section 25 of IRDAI Act 1999 provides for establishment of Insurance Advisory Committee
which has Representatives from commerce, industry, transport, agriculture, consume for a,
surveyor’s agents, intermediaries, organizations engaged in safety and loss prevention, research
bodies and employees’ association in the Insurance sector are represented. All the rules,
regulations, guidelines that are applicable to the industry are hosted on the website of the
supervisor and are available in the public domain.

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3. Section 14 of the IRDAI Act,1999 specifies the Duties, Powers and functions of the Authority.
These include the following:

 To grant licenses to (re) Insurance companies and Insurance intermediaries

 To protect interests of policyholders,
 To regulate investment of funds by Insurance companies, professional organisations
connected with the (re)Insurance business; maintenance of margin of solvency;
 To call for information from, undertaking inspection of, conducting enquiries and
investigations of the entities connected with the Insurance business;
 To specify requisite qualifications, code of conduct and practical training for
intermediary or Insurance intermediaries, agents and surveyors and loss assessors
 To prescribe form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other Insurance intermediaries;

Ministry
 What the Insurance Division Does:
Insurance Division is administratively concerned with the activities of life and non-life segments
of the nationalized insurance industry and Insurance Regulatory and Development Authority
(IRDA). The Functions of Division are:

 Policy formulation and administration of the following Acts of Parliament: -

o Insurance Act, 1938
o Life Insurance Corporation Act, 1956
o General Insurance Business (Nationalization) Act, 1972
o IRDA Act, 1999
o Actuaries Act, 2006
 Constant review and monitoring of the performance of the National Insurance
Companies.
 Framing of rules and regulations in respect of service conditions of employees of Public
Sector Insurance Companies.
 Appointment of Chief Executives and Directors on the Board of Public Sector Insurance
Companies and on the IRDA.

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  State Regulation law
Insurance is characterized as a business vested or affected with the public interest. Thus, the
business of insurance, although primarily a matter of private contract, is nevertheless of such
concern to the public as a whole that it is subject to governmental regulation to protect the
public’s interests.

Therefore, the fundamental purpose of insurance regulatory law is to protect the public as
insurance consumers and policyholders. Functionally, this involves:

 Licensing and regulating insurance companies and others involved in the insurance
industry;
 Monitoring and preserving the financial solvency of insurance companies;
 Regulating and standardizing insurance policies and products;
 Controlling market conduct and preventing unfair trade practices; and
 Regulating other aspects of the insurance industry.

 SEBI ROLE:
The Securities and Exchanges Board of India (SEBI) has said that the products sold by many
insurance companies require compliance with SEBI rules. It now insists that insurance
companies must comply with these rules. The unstated follow-on action would be that if the
sellers of these products fail to comply with these rules, SEBI would impose penalties upon them
based on the powers conferred on it under the SEBI Act.

Regulatory coordination

Even if the work of FSLRC goes well, putting these new laws into place will take a few years.
Even after these laws are in place, a modern financial system inevitably involves a constant
process of handling products and activities of financial firms which have either no regulation or
are covered by overlapping laws. The way to handle this in a more graceful fashion is to have
better inter-regulatory coordination.

The budget announcement of the Financial Stability and Development Council (FSDC), which
will foster better inter-regulatory coordination, is key to improving the handling of these kinds of
issues in the future. Conflicts such as these are best resolved internally. In recent years, two
interesting inter-regulatory matters have worked out well: the launch of exchange traded funds
on gold (which required cooperation of RBI, SEBI and FMC) and the launch of currency futures
(which required cooperation between RBI and FMC). Yet, the existing method of regulatory
coordination - the High Level Coordination Committee (HLCC) - has not been strong enough to
solve myriad other such problems. The FSDC must be quickly put into place so as to play a

Indira Institude Of Management, pune Page 34

strong role in identifying and resolving these inevitable frictions that will arise as finance
becomes more sophisticated and the laws are constantly out of touch with reality.

Competition Commission:
Competition is the best means of ensuring that the ‘Common Man’ or ‘AamAadmi’ has access to
the broadest range of goods and services at the most competitive prices. With increased
competition, producers will have maximum incentive to innovate and specialize. This would
result in reduced costs and wider choice to consumers. A fair competition in market is essential
to achieve this objective. Our goal is to create and sustain fair competition in the economy that
will provide a ‘level playing field’ to the producers and make the markets work for the welfare of
the consumers.

The Competition Act

The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows
the philosophy of modern competition laws. The Act prohibits anti-competitive agreements,
abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of
control and M&A), which causes or likely to cause an appreciable adverse effect on competition
within India.

Competition Commission of India

The objectives of the Act are sought to be achieved through the Competition Commission of
India (CCI), which has been established by the Central Government with effect from 14th
October 2003. CCI consists of a Chairperson and 6 Members appointed by the Central
Government.

It is the duty of the Commission to eliminate practices having adverse effect on competition,
promote and sustain competition, protect the interests of consumers and ensure freedom of trade
in the markets of India.

The Commission is also required to give opinion on competition issues on a reference received
from a statutory authority established under any law and to undertake competition advocacy,
create public awareness and impart training on competition issues.

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MRTP Commission and Competition Commission of India
Abstract

A commission known as the Monopolies and Restrictive Trade Practices Commission was
established under MRTP act, 1969. The MRTP Act, 1969 also provides for appointment of a
Director General of Investigation and Registration for making investigations for the purpose of
inquiries by the MRTP Commission and for maintenance of register of agreements relating to
restrictive trade practices. Competition commission of India establish under Indian Competition
Act, 2002. This administrative is more proactive than reactive for the administration of the
competition policy. The CCI is working more effectively under the new Act. This paper is an
attempt to examine the working of both the commissions.

Effect of Insurance Regulatory and Development Authority

(IRDA)
Effect on Regulation of Insurance Industry

Insurance Regulatory and Development Authority regulates the Insurance sector. It aims to
protect the interest of the insurance policy holders. It also encourages and ensure the systematic
growth of the insurance industry.

Effect over protection of policyholders

IRDA has great impact over the protection of policyholders. The Authority aims to provide fair
treatment to all the policyholders.

Effect over Awareness about Insurance

IRDA is taking steps to increase awareness amongst the masses about the benefits of insurance.
There is a separate Consumer education website of IRDA to educate people about insurance.

Indira Institude Of Management, pune Page 36

Effect over Insurance Market

There is a drastic effect of Insurance Regulatory and Development Authority over insurance
market. IRDA regulates the insurance market and ensure the systematic and speedy growth of
the insurance market.

Effect over Development of Insurance Product

All the insurance companies must take approval from Insurance Regulatory and Development
Authority before launching any new product or before making any changes in the existing
product or withdrawing a product. The authority may ask for additional information if required.
If no information is asked for then the insurer can start selling the product. The insurer can
introduce the new product after allowing it for 60 days for non-life and 30 days for life for
clearance by IRDA. This might be delayed due to lack of details about the product, which is
necessary to assess the product before approval is given by the Authority.

Effect on Competition between Private and Public sector

As there is more demand from the customer for new, beneficial and improved insurance
products, there is a healthy competition amongst the insurers. This acts as a boon to the
customer. Improved products along with attractive schemes has been designed by the public
sector to give tough competition to the private sector.

Effect over Banks and Post Offices

With the increasing awareness amongst people about the benefits of insurance, the flow of funds
has shifted to the insurance industry from Banks and Post Offices. Insurance has become a
medium for not only covering losses and risks but has also become a popular way to save tax.

Bhopal Gas tragedy – Importance of Insurance

A Story of Industrial Disaster vis-à-vis Insurance Protection

In 1970, Union Carbide India Ltd (UCIL) established a pesticide manufacturing plant in Bhopal.
Pesticides are substances, which shield crops from being damaged by pests. Pesticides are toxic
chemicals. In December 3, 1984, a fatal gas, namely, Methyl Isocyanate (MIC) started leaking
from a tank at UCIL Bhopal plant. Due to leakage of this fatal gas, approximately 3,800 people
lost their lives and many other suffered other health related ailments.

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Human life is precious and nothing can compensate the loss of a life. The company was bound to
pay compensation to the dependents of the victims to lost their lives. UCIL had to compensate
for the damages caused.

Even though human life is invaluable but this situation like these Insurance acts as a big relief.
Insurance helps to recover the losses to some extent as the resulting financial liabilities could be
transferred to the insurer. Insurance acts as a preventive measure for the unforeseen events,
which reduces the financial burden.

Ultimately, an Act was introduced to provide damages to the sufferers of the accidents, which
has resulted due to the handling of hazardous chemicals. The Act is Public Liability Insurance
Act, 1991, which is applicable to all the owners, related with the manufacturing or handling of
the hazardous substance.

Workmen Compensation Act, 1923 also provide compensation to employees in case of injury at
the workplace. The employer is liable to pay compensation to the injured employee in case of
mishappening. The amount of compensation depends on various factors like nature of the injury,
age of the employee, the average monthly wage of the employee.

Furthermore, if the victims who died in the Bhopal gas tragedy had their lives insured, their
families would have received some amount of money as help. Money cannot compensate
anyone’s life but it can surely act as some support to tide over their loss. In today’s time of
uncertainty, everyone must take the benefit of insurance.

Conclusion:
Indian economy is growing rapidly. There are several new players in the insurance industry, which has
opened new opportunities and has contributed the employment generation. Insurance awareness is
very important at different levels of the society. Individuals should know the importance and the
consequent benefits of insurance. In order to achieve higher levels of penetration and spread of
insurance among larger sections of the population, the insurance companies should pay more
concentration on the rural communities rather than the urban and the higher segment of the society.
With IRDA in place, the insurance sector is regulated and the interest of the policyholders is ensured.
IRDA also has to bring necessary changes whenever required in consultation with the stakeholders

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Key factors
1. It has been a soft market for a long time
The commercial insurance market has been soft since the early 2000’s. Although there are signs
the market is hardening, in certain segments at least, the pressure on premiums and commissions
is forcing agents to change tactics.

Some have specialised in faster growing segments such as cyber insurance or home health care.
Most are reducing operating costs, and everyone is trying to secure better arrangements and
commissions from carriers.

2. The sector is growing…slowly

From a high of 12.5 per cent in 2006, annual agency growth slumped to 1 per cent in 2010,
although it has since recovered — S&P forecast an average 3 per cent to 5 per cent growth in
2018.

That’s a bit higher than global GDP growth (about 4 per cent pa) but the message is clear: agents
can’t take growth for granted and need to work smarter and harder.

Adding revenue streams from new markets or business lines, cross-selling to the customer base.
and prioritising customer satisfaction to encourage retention have taken on increased importance.

3. M&A is an attractive, but difficult, option

In a slow-growing soft market, size matters, and more agents are considering a merger or
acquisition to complement organic growth. Insurance agency M&As soared by 31 per cent in
2017 and the pace is still high this year.

Aside from revenue growth, M&A is attractive because scale — more staff, products and
business lines — helps the agent reduce risk, avoid hostile acquisition, or position itself as an
attractive acquisition target.

But for all their benefits, making a success of a merger or acquisition is not straightforward.
Inexperience or poor leadership can mean the loss of key people, closing business with a low
ROI just to meet aggressive revenue targets, or spiralling costs because management attention is
elsewhere.

4. Rules and regulations are getting tougher

State and federal agencies, along with the National Association of Insurance Commissioners,
continue to tighten the operational framework for US agents, and those that operate outside the
country have even more strict compliance obligations.

Indira Institude Of Management, pune Page 39

The Department of Labor Fiduciary Rule, which governs how an advisor deals with a client, will
be strengthened later this year, and the European Union’s updated Insurance distribution
Directive takes effect in October.

Cybersecurity regulations are getting tougher and, although they are not specific to the insurance
sector, data protection regulations — GDPR in Europe and the emerging Data Security and
Breach Notification Act in the US — are increasingly important to agents, given how
fundamental personal data is to their day-to-day operations.

5. Customer expectations have changed

Research has shown that over 70 per cent of customers expect businesses to tailor
communications and services based on knowledge gained from previous interactions, and they
want a frictionless experience - hassle-free, no waiting, and self-service where possible.

Buyer demographics are also changing. Digital-savvy millennials are gradually replacing baby
boomers as the main buyers of personal insurance and, with a phone always in hand, expect to
transact anytime from anywhere.

Indira Institude Of Management, pune Page 40

Chapter- 4
Financials
ICICI Lombard general insurance

Profit and loss –

Year Latest 2018 2017 2016

No. of Companies 33 19 25 31
INCOME :
Operating Income 136,009.26 107,930.11 108,787.95 91,407.14
Other Income 25,072.41 18,234.30 21,420.65 24,012.01
Total Income 161,081.67 126,164.41 130,208.60 115,419.15
EXPENDITURE :
Operating &
Administration 134,882.38 104,197.07 111,374.38 93,382.74
Expenses
Miscellaneous
1,766.62 1,220.77 1,484.88 1,819.94
Expenses
Interest 702.66 673.70 164.20 129.46
Less: Pre-operative
10.81 10.81 0.00 0.00
Expenses Capitalised
Employee Expense 12,818.09 7,522.59 11,469.59 12,195.48
Total Expenditure 150,158.94 113,603.32 124,493.05 107,527.62
Gross Profit 10,823.62 12,504.68 5,612.92 7,861.14
Depreciation 575.04 312.98 389.66 539.99
Profit Before Tax 10,248.58 12,191.70 5,223.26 7,321.15
Tax 2,501.95 2,630.61 1,554.54 1,523.74
Fringe Benefit tax 0.00 0.00 0.00 0.12
Deferred Tax -120.89 -125.76 37.82 -176.10
Reported Net Profit 7,867.52 9,686.84 3,630.91 5,973.38

Indira Institude Of Management, pune Page 41

 Extraordinary Items 7,274.68 4,189.72 6,194.79 6,594.55
Adjusted Net Profit 592.84 5,497.12 -2,563.88 -621.17
Adjustment below net
-280.97 -280.97 477.54 818.81
profit
P & L Balance
6,497.77 8,818.50 2,146.79 200.64
brought forward
Appropriations 5,377.30 6,698.79 -1,735.92 5,048.84
P & L Balance
8,707.04 11,525.59 7,991.16 1,943.99
carried down
Dividend 278.10 278.10 255.45 1,334.37
Preference Dividend 0.00 0.00 0.00 0.00

Cash flow –

Year Latest 2018 2017 2016

No. of Companies 33 19 25 31
SOURCES OF FUNDS :
Share Capital 13,775.88 8,381.97 9,140.05 12,414.45
Reserves Total 79,565.93 66,875.81 68,460.28 81,150.94
Equity Share Warrants 0.00 0.00 0.00 0.00
Equity Application Money 0.11 0.11 1.37 90.13
Total Shareholders Funds 93,341.92 75,257.89 77,601.70 93,655.52
Secured Loans 895.00 0.00 895.00 0.00
Unsecured Loans 2,758.36 2,758.00 1,208.36 0.09
Total Loan Funds 3,653.36 2,758.00 2,103.36 0.09
Other Liabilities 59,818.93 49,506.22 62,835.81 31,986.29
Total Liabilities 156,814.21 127,522.11 142,540.87 125,641.90
APPLICATION OF FUNDS
:
Loan / Non-Current Assets 0.00 0.00 0.00 0.00
Fixed Assets
Gross Block 9,829.10 7,167.25 8,097.60 5,651.40
Less: Accumulated
4,857.18 3,044.87 3,933.73 3,248.83
Depreciation

Indira Institude Of Management, pune Page 42

 Less:Impairment of Assets 0.00 0.00 0.00 0.00
Net Block 4,971.92 4,122.38 4,163.87 2,402.57
Lease Adjustment 0.00 0.00 0.00 0.00
Capital Work in Progress 601.28 284.84 516.43 328.56
Investments 313,108.00 244,902.75 272,086.89 240,845.67
Current Assets, Loans &
Advances
Inventories 0.00 0.00 0.00 0.00
Sundry Debtors 8,250.64 8,250.64 6,376.15 0.00
Cash and Bank Balance 34,942.99 29,259.10 29,892.13 25,088.21
Loans and Advances 64,520.45 50,715.68 51,968.03 45,108.96
Total Current Assets 107,714.08 88,225.41 88,236.32 70,197.19
Less: Current Liab. &
Provisions
Current Liabilities 202,582.17 159,012.93 164,474.90 135,524.42
Provisions 69,637.58 52,819.68 60,461.69 55,644.45
Total Current Liabilites &
272,219.74 211,832.61 224,936.56 191,168.89
Provisions
Net Current Assets -164,505.69 -123,607.22 -136,700.25 -120,971.72
Miscellaneous Expenses not
464.52 0.00 464.52 1,364.83
written off
Deferred Tax Assets 793.05 779.95 653.13 628.70
Deferred Tax Liability 44.78 44.78 33.77 34.05
Net Deferred Tax 748.27 735.17 619.36 594.65
Other Assets 1,425.84 1,084.16 1,390.05 1,077.35
Total Assets 156,814.16 127,522.09 142,540.88 125,641.86
Contingent Liability 15,591.95 13,463.28 14,394.28 10,205.54

Ratios –

Year Latest 2018 2017 2016

No.Of Companies 33 19 25 31
Key Ratios
Debt-Equity Ratio 0.29 0.77 0.56 0.39

Indira Institude Of Management, pune Page 43

 Long Term Debt-Equity
0.29 0.77 0.56 0.39
Ratio
Current Ratio 0.39 0.41 0.39 0.40
Turnover Ratios
Fixed Assets 13.16 14.25 16.16 17.50
Inventory 0.00 0.00 0.00 0.00
Debtors 16.11 14.76 34.54 0.00
Interest Cover Ratio 4.32 11.65 -5.22 43.51
PBIDTM (%) 2.72 7.56 -0.52 5.04
PBITM (%) 2.26 7.27 -0.88 4.45
PBDTM (%) 2.20 6.94 -0.69 4.94
CPM (%) 0.82 5.38 -1.83 3.50
APATM (%) 0.35 5.09 -2.19 2.91
ROCE (%) 1.88 5.82 -0.73 3.17
RONW (%) 0.37 7.17 -2.81 2.85

Indira Institude Of Management, pune Page 44

Bajaj Allianz general insurance

Profit and loss –

Mar 18 Mar 17
Year Mar 16 (12)
(12) (12)
INCOME :
Operating Income+ 6,058.57 4,937.05 4,223.65
Other Income + 1,094.06 1,035.88 853.39
Total Income 7,152.63 5,972.93 5,077.04
EXPENDITURE :
Operating & Administration Expenses + 5,035.96 4,264.79 3,879.85
Miscellaneous Expenses + 98.15 82.15 75.78
Interest + 18.97 11.02 5.99
Less: Pre-operative Expenses Capitalised + 0.00 0.00 0.00
Employee Expense + 591.87 481.78 321.78
Total Expenditure 5,744.95 4,839.74 4,283.40
Gross Profit 1,385.76 1,101.37 793.64
Depreciation + 32.84 23.25 22.17
Profit Before Tax 1,352.92 1,078.12 771.47
Tax+ 420.53 351.20 225.43
Fringe Benefit tax+ 0.00 0.00 0.00
Deferred Tax+ 11.14 -0.92 -18.18
Reported Net Profit 921.24 727.84 564.22
Extraordinary Items + 0.16 0.49 0.05
Adjusted Net Profit 921.08 727.35 564.17
Adjustment below net profit + 0.00 0.00 0.00
P & L Balance brought forward 3,240.70 2,512.86 1,948.64
Appropriations + 0.00 0.00 0.00
P & L Balance carried down 4,161.94 3,240.70 2,512.86
Dividend 0.00 0.00 0.00
Preference Dividend 0.00 0.00 0.00

Indira Institude Of Management, pune Page 45

 Equity Dividend % 0.00 0.00 0.00
Dividend Per Share(Rs) 0.00 0.00 0.00
Earnings Per Share-Unit Curr 83.58 66.03 51.19
Earnings Per Share(Adj)-Unit Curr 0.00 0.00 0.00
Book Value-Unit Curr 405.20 320.67 253.09
Book Value(Adj)-Unit Curr 0.00 0.00 0.00

Cash flow –

Mar Mar Mar

Year Mar 18 Mar 13
17 16 14
Cash Flow Summary
Cash and Cash Equivalents at Beginning
552.85 275.04 393.71 254.49 211.91
of the year
Net Cash from Operating Activities+ 2,996.38 695.51 486.07 649.07 748.82
- - - -
Net Cash Used in Investing Activities+ -706.24
2,721.56 417.70 604.73 573.90
Net Cash Used in Financing Activities+ 0.00 0.00 0.00 0.00 0.00
-
Net Inc/(Dec) in Cash and Cash Equivalent 274.82 277.81 75.17 42.58
118.66
Cash and Cash Equivalents at End of the year 827.68 552.85 275.04 329.66 254.49

Ratios –

Mar
Year Mar 18 Mar 16
17
Key Ratios
Debt-Equity Ratio 0.00 0.00 0.00
Long Term Debt-Equity Ratio 0.00 0.00 0.00
Current Ratio 0.22 0.21 0.17

Turnover Ratios

Indira Institude Of Management, pune Page 46

 Fixed Assets 12.00 10.22 9.05
Inventory 0.00 0.00 0.00
Debtors 0.00 0.00 0.00
Interest Cover Ratio 72.32 98.83 129.79
PBIDTM (%) 23.19 22.53 18.93
PBITM (%) 22.64 22.06 18.41
PBDTM (%) 22.87 22.31 18.79
CPM (%) 15.75 15.21 13.88
APATM (%) 15.21 14.74 13.36
ROCE (%) 34.29 34.44 27.87
RONW (%) 23.03 23.02 20.23

Tata AIG

Profit And loss –

Year Mar 16 (12) Mar 15 (12)

INCOME :
Operating Income+ 2,303.68 2,012.81
Other Income + 96.17 91.48
Total Income 2,399.85 2,104.29
EXPENDITURE :
Operating & Administration Expenses + 2,000.05 1,583.35
Miscellaneous Expenses + 161.03 120.23
Interest + 3.50 9.83
Less: Pre-operative Expenses Capitalised + 0.00 0.00
Employee Expense + 189.20 165.59
Total Expenditure 2,353.78 1,879.00

Indira Institude Of Management, pune Page 47

Gross Profit 46.07 225.29
Depreciation + 17.65 15.14
Profit Before Tax 28.42 210.15
Tax+ 0.00 60.61
Fringe Benefit tax+ 0.00 0.00
Deferred Tax+ 8.45 -4.53
Reported Net Profit 19.98 154.07
Extraordinary Items + 0.00 0.00
Adjusted Net Profit 19.98 154.07
Adjustment below net profit + 0.00 0.00
P & L Balance brought forward 314.67 206.18
Appropriations + 0.00 45.59
P & L Balance carried down 334.65 314.67
Dividend 0.00 37.88
Preference Dividend 0.00 0.00
Equity Dividend % 0.00 7.50
Dividend Per Share(Rs) 0.00 0.75
Earnings Per Share-Unit Curr 0.32 2.90
Earnings Per Share(Adj)-Unit Curr 0.00 0.00
Book Value-Unit Curr 16.83 16.53
Book Value(Adj)-Unit Curr 0.00 0.00

Indira Institude Of Management, pune Page 48

Cash flow –
Mar
Year
16
Cash Flow Summary
Cash and Cash Equivalents at Beginning of the
212.71
year
Net Cash from Operating Activities+ 181.24
-
Net Cash Used in Investing Activities+
282.11
Net Cash Used in Financing Activities+ 164.41
Net Inc/(Dec) in Cash and Cash Equivalent 63.54
Cash and Cash Equivalents at End of the year 276.25

Ratios –
Year Mar 16 Mar 15
Key Ratios
Debt-Equity Ratio 0.00 0.00
Long Term Debt-Equity Ratio 0.00 0.00
Current Ratio 0.19 0.21
Turnover Ratios
Fixed Assets 9.86 8.98
Inventory 0.00 0.00
Debtors 0.00 0.00
Interest Cover Ratio 9.12 22.38
PBIDTM (%) 2.15 11.68
PBITM (%) 1.39 10.93
PBDTM (%) 2.00 11.19
CPM (%) 1.63 8.41
APATM (%) 0.87 7.65
ROCE (%) 3.37 25.97
RONW (%) 2.10 18.46

Indira Institude Of Management, pune Page 49

Bharti AXA
Profit and loss –

Mar 18 Mar 17 Mar 16

Year
(12) (12) (12)
INCOME :
Operating Income+ 1,213.43 1,138.80 1,158.22
Other Income + 272.00 253.67 233.45
Total Income 1,485.43 1,392.47 1,391.67
EXPENDITURE :
Operating & Administration Expenses + 1,403.87 1,395.53 1,470.68
Miscellaneous Expenses + 24.66 -3.59 2.58
Interest + 17.08 1.71 1.48
Less: Pre-operative Expenses Capitalised + 0.00 0.00 0.00
Employee Expense + 125.29 119.91 111.56
Total Expenditure 1,570.90 1,513.56 1,586.30
Gross Profit -85.47 -121.09 -194.64
Depreciation + 7.16 7.55 9.60
Profit Before Tax -92.63 -128.64 -204.24
Tax+ 0.00 0.00 0.00
Fringe Benefit tax+ 0.00 0.00 0.12
Deferred Tax+ 0.00 0.00 0.00
Reported Net Profit -92.63 -128.63 -204.36
Extraordinary Items + -0.42 -0.01 3.27
Adjusted Net Profit -92.21 -128.62 -207.63
Adjustment below net profit + 0.00 0.00 0.00
P & L Balance brought forward -1,183.06 -1,054.43 -850.07
Appropriations + 0.00 0.00 0.00
P & L Balance carried down -1,275.69 -1,183.06 -1,054.43
Dividend 0.00 0.00 0.00
Preference Dividend 0.00 0.00 0.00

Indira Institude Of Management, pune Page 50

 Equity Dividend % 0.00 0.00 0.00
Dividend Per Share(Rs) 0.00 0.00 0.00
Earnings Per Share-Unit Curr 0.00 0.00 0.00
Earnings Per Share(Adj)-Unit Curr 0.00 0.00 0.00
Book Value-Unit Curr 3.19 3.76 4.39
Book Value(Adj)-Unit Curr 0.00 0.00 0.00

Cash flow –

Year Mar 18 Mar 17 Mar 16

Cash Flow Summary
Cash and Cash Equivalents at Beginning of the
0.00 0.00 47.65
Year
Net Cash from Operating Activities+ 0.00 0.00 -170.50
Net Cash Used in Investing Activities+ 0.00 0.00 -169.15
Net Cash Used in Financing Activities+ 0.00 0.00 334.50
Net Inc/(Dec) in Cash and Cash Equivalent 0.00 0.00 -5.15
Cash and Cash Equivalents at End of the year 0.00 0.00 42.50

Ratios –

Year Mar 18 Mar 17 Mar 16

Key Ratios
Debt-Equity Ratio 0.19 0.00 0.00
Long Term Debt-Equity Ratio 0.19 0.00 0.00
Current Ratio 0.17 0.12 0.13
Turnover Ratios
Fixed Assets 17.00 16.29 16.45

Indira Institude Of Management, pune Page 51

 Inventory 0.00 0.00 0.00
Debtors 0.00 0.00 0.00
Interest Cover Ratio -4.42 -74.22 -137.00
PBIDTM (%) -5.64 -10.48 -16.68
PBITM (%) -6.23 -11.15 -17.51
PBDTM (%) -7.04 -10.63 -16.81
CPM (%) -7.04 -10.63 -16.82
APATM (%) -7.63 -11.30 -17.64
ROCE (%) 0.00 0.00 0.00
RONW (%) 0.00 0.00 0.00

Royal sundaram insurance

Profit and loss –

Mar 18 Mar 17 Mar 16

Year
(12) (12) (12)
INCOME :
Operating Income+ 1,940.44 1,720.99 1,390.02
Other Income + 339.52 309.84 238.34
Total Income 2,279.96 2,030.83 1,628.36
EXPENDITURE :
Operating & Administration Expenses + 1,973.29 1,817.09 1,458.49

Indira Institude Of Management, pune Page 52

 Miscellaneous Expenses + 17.08 12.20 8.28
Interest + 14.79 5.70 2.10
Less: Pre-operative Expenses Capitalised + 0.00 0.00 0.00
Employee Expense + 137.17 121.80 110.54
Total Expenditure 2,142.33 1,956.79 1,579.41
Gross Profit 137.63 74.03 48.95
Depreciation + 11.61 11.24 12.83
Profit Before Tax 126.02 62.79 36.12
Tax+ 53.35 9.35 24.50
Fringe Benefit tax+ 0.00 0.00 0.00
Deferred Tax+ -10.62 10.39 -15.05
Reported Net Profit 83.30 43.05 26.66
Extraordinary Items + 27.16 40.21 4.70
Adjusted Net Profit 56.14 2.84 21.96
Adjustment below net profit + 0.00 0.00 0.00
P & L Balance brought forward 237.23 194.18 167.52
Appropriations + 0.00 0.00 0.00
P & L Balance carried down 320.53 237.23 194.18
Dividend 0.00 0.00 0.00
Preference Dividend 0.00 0.00 0.00
Equity Dividend % 0.00 0.00 0.00
Dividend Per Share(Rs) 0.00 0.00 0.00
Earnings Per Share-Unit Curr 1.86 1.30 0.85
Earnings Per Share(Adj)-Unit Curr 0.00 0.00 0.00
Book Value-Unit Curr 22.82 19.52 18.13
Book Value(Adj)-Unit Curr 0.00 0.00 0.00

Cash flow –

Mar
Year Mar 18 Mar 17
16
Cash Flow Summary
Cash and Cash Equivalents at Beginning of the year 77.44 58.18 49.69

Indira Institude Of Management, pune Page 53

 Net Cash from Operating Activities+ 345.92 238.50 17.56
Net Cash Used in Investing Activities+ -652.83 -349.25 -9.07
Net Cash Used in Financing Activities+ 295.00 130.00 0.00
Net Inc/(Dec) in Cash and Cash Equivalent -11.90 19.26 8.49
Cash and Cash Equivalents at End of the year 65.54 77.44 58.18

Ratios –

Year Mar 18 Mar 17 Mar 16

Key Ratios
Debt-Equity Ratio 0.12 0.08 0.00
Long Term Debt-Equity Ratio 0.12 0.08 0.00
Current Ratio 0.12 0.12 0.12

Turnover Ratios
Fixed Assets 14.56 13.71 11.69
Inventory 0.00 0.00 0.00
Debtors 0.00 0.00 0.00
Interest Cover Ratio 6.45 1.04 11.23
PBIDTM (%) 5.51 1.00 2.62
PBITM (%) 4.92 0.34 1.70
PBDTM (%) 4.75 0.66 2.47
CPM (%) 3.49 0.82 2.50
APATM (%) 2.89 0.17 1.58
ROCE (%) 10.15 0.89 4.21
RONW (%) 6.72 0.47 3.92

Indira Institude Of Management, pune Page 54

Insurance Sectors contribution to GDP
Year Total GDP GDP Percent of total GDP
2013 $16,691.5 $406.2 2.4%
2014 17,427.6 473.1 2.7
2015 18,120.7 559.5 3.1
2016 18,624.5 585.9 3.1
2017 19,390.6 602.7 (1) 3.1

Indira Institude Of Management, pune Page 55

Chapter -5
Recent development
Recent Developments in the Insurance Sector

Introduction
When looking at the insurance sector there is a wide spectrum of business types which includes
life insurers, non-life insurers and reinsurers. Life insurers are best categorised as ‘asset’
businesses usually linked in some way to the provision of savings, pensions or annuities of some
kind.

Life and non-life insurance companies both operate in a highly regulated environment and the
typical balance sheet will have very substantial cash and investments so liquidity is generally not
an issue. As a consequence, the ability of these entities to meet the liabilities as they fall due in
the short term is invariably not the critical factor but rather the overall assessment of the balance
sheet position which can include some very material and significant assumptions. As a
consequence restructuring in the insurance arena, common with other areas of financial services,
has different pressure points and therefore there is a tendency for insurance restructuring
assignment

The restructuring need is predominately balance sheet driven often through some increase in
liabilities (e.g. new reported losses on a catastrophic event.) such that the assets are insufficient
to discharge the liabilities. Alternatively, there may be some decrease in the value of assets with
a similar balance sheet outcome. A significant, and common, exception to this is a restructuring
that may be required where financing (debt or equity) is structurally subordinated in non-
regulated holding companies or some intermediate holding company. The structural
subordination protects policyholders in a regulated vehicle but can give rise to liquidity issues in
servicing the debt if there is insufficient dividend funds flow from the regulated vehicle to
service debt structures at the holding company level. This very issue can be observed in a
number of recent situations such as Goshawk, Quanta and PXRE where the companies ceased
underwriting new business following hurricanes Katrina, Rita and Wilma in 2005 and regulatory
intervention

By contrast, at the most recent year end renewal, premium rates have softened considerably and
coupled with the deteriorating investment environment the situation may be about to change.
Many of the earnings announcements from the insurer have directly commented on this changing
landscape.

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Legal and regulatory developments (Solvency II)

The EU is currently in the process of developing a comprehensive new framework for insurance
supervision and regulation. This new framework is referred to as Solvency II and is scheduled to
be implemented in or around 2012. The change in approach is a significant one with the
development of a comprehensive risk based approach to regulation. Insurance groups are
upgrading their capital modelling in anticipation of the new regime and at the same time using
this as an opportunity to assess capital efficiency and ways in which that can be improved.

For some groups the spotlight has turned on the capital cost of discontinued lines of business.
Discontinued lines of business arise where business has been underwritten in the past but the
obligation to pay claims may continue to run for many years after the last receipt of premiums.
Historically the focus for capital measurement has been on future premium income. Capital
modelling also considers the volatility in claims reserves and where such reserves relate to
discontinued business this can be a significant capital drain.

1. New Models, Personalized Products:

The digital economy will make usage-based, on-demand and 'all-in-one' insurance lifestyle
products more relevant. Customers will prefer personalized insurance covers instead of the one-
size-fits-all products currently available.

Today, more than 80 percent of the premiums collected by insurers is lost to distribution costs.
Digital models will make intermediaries in the insurance value chain - marked by their excessive
dependence on human effort - obsolete.

Flexible coverage options, micro insurance and peer-to-peer insurance will become viable
options in the long run. Reinsurers will provide risk capital directly to digital brands, and
regulatory frameworks will accommodate shorter value chains.

Lifestyle apps will re-imagine the insurer-insured relationships. Application Programming

Interfaces (APIs) will enable the creation of insights-driven offerings as they integrate data from
multiple sources. Deeper understanding of customer behaviours will lead to more accurate risk
assessments, personalized premiums and value on a sustainable basis for better customer
experience and brand loyalty, plus reduced false claims.

Indira Institude Of Management, pune Page 57

 2. AI & Automation for Faster Claims:
Robotic Process Automation (RPA) and AI will occupy centre stage in insurance, driven by
newer data channels, better data processing capabilities and advancements in AI algorithms. For
example, insures company Lemonade's business model deploys AI and behavioural economics
as its core elements. While AI eliminates brokers and paperwork, its behavioural economics
capabilities minimize fraud - leading to reduced time, effort and costs.

Another Insures firm Tyche has deployed an AI-infused claim likelihood model in underwriting
to accurately determine the risks and achieve higher profitability.

Bots will become mainstream in both the front and back-office to automate policy servicing and
claims management for faster and more personalized customer service. For example, a leading
U.S. auto insurer's virtual assistant answers customer queries on policies and payments.
Lemonade's claims bot Jim assesses and pays out property claims in just three seconds.
Automated insurance agent SPIXII interacts with customers through a mobile app and other
messenger platforms to help in the purchase of the right policies.

AI and automation will profoundly impact and improve business outcomes in customer
experience, cost optimization, operational efficiencies, market competitiveness and newer
business models.

3. Advanced Analytics &Proactiveness:

Premiums will become highly personalized, enabled by new sources of tech-enabled data such as
Internet of Things, mobile-enabled Insures apps and wearables. With the connected devices
market poised to grow strongly in the next five years, Property and Casualty (P&C) insurers will
be able to extract real-time and accurate data on the loss exposure of individual consumers. This
will help them proactively respond with timely and highly personalized interventions.

A Europe-based insurance company's partnership with Panasonic is a good example. Panasonic's

sensors provide mobile alerts to both the insurer and its customers for quick and informed
mitigation of issues.

Drone and imaging technology will increasingly enable insurers to obtain high-definition images
for remote and accurate property estimations and analysis. A few leading U.S. auto insurers
deployed drones to assess Hurricane Harvey's damages. An Australian insurance company was
able to settle 90 percent of big loss claims within 90 days by deploying drones. 2

Indira Institude Of Management, pune Page 58

Additionally, insights will be built through data set relationships to create deeper granularity in
individual risk profiles and protect insurers from emerging risk exposures. For example, a U.K.-
based insurance company leverages predictive analytics to model complex customer behaviour,
achieve enhanced pricing accuracy and significantly reduce decision time. A U.S. insurer
deploys a telematics device to provide drivers real-time feedback to encourage safe-driving. This
has helped customers save up to 40 percent on insurance premiums. 3

Advanced analytics will be deployed to dynamically segment users and needs, model behaviours
and identify exceptions, adjust policy prices, optimize business strategies, and identify new
growth opportunities. Scale can be further incorporated through automation, AI and machine
learning to transform insurers into active risk managers.

4. InsurTech Partnerships:
Insures firms have been showing significant growth in the areas of auto, home ownership and
cyber insurance. Such strong growth will stimulate traditional insurers to either acquire
technology capabilities or partner with Insures companies. With an increasing demand for
innovative products and services from millennials, such collaboration will become a critical
imperative.

Overall, it will be a win-win situation — traditional insurers will benefit from faster results in
establishing a tech culture and Insures companies will get access to larger customer bases,
funding and domain expertise. It will give rise to newer models and revenue streams for higher
profitability and reduced operational costs. Customer experiences will be enhanced with value-
added offerings.

5. Mainstreaming Blockchain:
The need for huge volumes of customer data to be processed in real time by different insurance
functions calls for easy and secure transfer of data across organizations and their diverse
stakeholders.

Block chain technology provides the advantage of secure data management across multiple
interfaces and stakeholders without loss of integrity. From identity management and
underwriting to claims processing, fraud management and reliable data availability, the
technology offers reduced operational costs. Decentralized Autonomous Organizations (DAOs)
and smart contracts are additional benefits that blockchain can offer in policy management.

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Interestingly, more than 38 insurance and reinsurance companies have embarked on an initiative
called the B3i to explore blockchain applications in insurance. The beta version of a blockchain-
based insurance solution is expected to be deployed in 2018.

The above trends indicate that new value worth billions of dollars can be created for the
insurance industry. The key is to understand how and when to tap into this potential leveraging
existing and new technologies.

Blockchain and its impact on the insurance industry

Along with cutting down operational costs and ensuring fast, reliable, and secure applications,
blockchain has the potential to disrupt existing business models in several ways.

 With blockchain, the distributed ledger technology (DLT) which ensures that digital data
is safe, there are fewer chances of identity theft or fraud (e.g. Ever ledger, Block Verify).
In the US, insurance fraud is estimated to be over $80 million and, in the UK, it is around
£2.1 billion!

 This is the surest way to better customer experience, especially to deal with irritated
customers expected to submit some zillion documents (say, KYC) many times.
Automating processes such as validating identity, health and police records, etc. not only
reduces admin costs but also improves customer engagement.

 Decentralized blockchain makes it easier to authenticate transactions, policies, and

customers. Companies such as Nephilim Capital and Allianz are using smart contract
technology (Also read – What is a smart contract and how does it work) to process claims
and fast. With blockchain, they can ensure underwriting and catastrophe risk trading are
more efficient.

 Insurance companies are leveraging bitcoin as loyalty and reward programs. For both the
providers and the customers who do not want to compromise competitiveness or privacy,
respectively, such systems enabled by blockchain make it a seamless, cost-effective, and
rewarding experience.

IoT
IoT devices, sensors, and telematics have been fast gaining adoption in the insurance sector.
Several data streams and sources (wearables, sensors embedded in vehicles, location-based
sensors, GIS) coupled with advanced analytics can help insurers improve risk assessment, price
policies based on real data in real time, and proactively encourage customers to buy policies for
loss prevention.

 More usage-based insurance models for connected vehicles and precise actuarial models
are expected with the huge amounts of data (or touchpoints) available thanks to today’s
amazingly connected world. In the auto insurance sector, for example, the data (speed,

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 time, braking patterns, distance) gives buyers more say in their premiums; risky driving
patterns can serve as warning signs.
 Blockchain can be the “network connecting and ordering data from the multiple devices
and apps involved in a multidimensional process.” (EY, 2016) It can help manage the
huge volumes by ensuring P2P device communication.
 Companies such as Aviva and State Farm urge customers to invest in home sensors
(others such as Fit Sense deal with fit tech to help insurers), incentivizing them to help
prevent risk to self (e.g. elderly care) and property. For example, Neos Ventures, UK’s
first connected home insurance specialist, provides preventative smart technology as part
of the policy.

Artificial Intelligence and Automation in the insurance

industry
Automation and AI have transformed almost every sector across the world, and the insurance
industry is no exception.

According to Accenture’s Technology Vision for Insurance 2017, 94% of “insurance executives
agree that adopting a platform-based business model and engaging in ecosystems with digital
partners are critical to their business.” In 2016, 35% of insurers reported over 15% in cost
savings from automating systems and processes in the last two years.

 Automation of more complex tasks (other than compliance checks or data entry) such as
property assessment and personalized consumer interactions over the years has brought
frictionless experiences and cut down redundancy.
 Employing AI in the claims process has brought better quality and lesser time for
handling (e.g. Rightminded, Shift Technology). AI algorithms can save millions lost to
fraudulent claims by scouring data and identify errors and trends. The future is definitely
touchless!
 Machine learning can be useful in evaluating risk and identifying cross-selling
opportunities. Hogan, China’s first online-only insurance technology company, uses AI,
machine learning, and big data to “simplify insurance, price risk more finely and
distribute cheaply to a mass market via the internet.”
 For automated claims processing and property assessment, P&C insurance providers (e.g.
AIG, USAA) are using drones for more accurate information and faster processing.

Big Data and Predictive Analytics in insurance

Although seemingly unmanageable amounts of data are churned out every day, advanced
analytics has been helping insurers manage risk, drive profitability, settle claims, and price
premiums better and faster. Extracting value from data using powerful analytics and data
warehousing platforms have enabled evidence-based decision making.

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  According to a Willis Towers Watson survey, big data and predictive analysis will
expand customer relationships, improve internal performance management, and enhance
customer value proposition by about 20 to 30%.
 In the claims cycle, using exception reporting, text mining, rules, and database searches,
the predictive analysis identifies fraud more effectively. Claims and fraud analytics will
better insurer profitability.
 Identifying subrogation opportunities sooner using text analytics, loss expenses can be
minimized, and loss recovery can be maximized.

Augmented Reality/Virtual Reality

These technologies will provide superior experiences for customers by using novel ways to talk
about insurance products and services and for employee training.

 AR apps-based tutorials and games can be valuable marketing tools and can help gather
customer insights and reduce the cost of training by enhancing the learning experience.
 For example, MetLife provides product info via AR videos, Allianz tells consumers about
possible home accidents via AR, AXA spreads awareness about car accidents through
AR apps, Zurich improves L&D for its employees through mobile apps, and some
companies are using AR for claims processing (e.g. car damage assessment app).
 Insurers leverage VR technologies in various ways. Say, virtual driving tests could help
insurance providers while deciding the coverage for a new client. Health insurance
providers are happy with the premium savings kickback from digital consultations.
Property and Casualty (P&C) insurers use simulations to train agents and underwriters.
 It is important to note that one of the fastest growing insurance is Cyber insurance; mixed
reality will bring a slew of new risks (health, behavioural, privacy, and information
security risks) and new growth opportunities for insure.

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