Economics Project On Insurance

Insurance in India

PRESENTED BY:    

Mihir Trivedi - 02 Rajaram Palav - 26 Chandan Kokul - 27 Samson Aranha - 28 Bansi Mehta - 23

Index          

Definition of Insurance. History of Insurance. Liberlisation. Contribution to the Economy. Introduction of Micro insurance. Misconceptions. Critical Features. IRDA. Target Market. Critical Issues.

Definition : “Covers an individual / Company /Household for some or all of a financial loss that is linked to an unpredictable event or risk, via risk pooling & the payment of a premium.”

  

   



1850 the first insurance company was formed in India. 1938 The insurance act was passed. 1947 economic nationalization began in insurance sector. 1972 Insurance market was fully nationalized. 1991 economic liberalization was began. 1994 Marine tariffs were removed. 1999 the Insurance regulatory & development authority Act (IRDA) was formed.

Liberalisation: “ In 1991 Economic liberlisation began under Dr.Manmohan Singh.3 Yrs later the Malhotra committee report on the state of Indian insurance industry was released. These recommendation were put in to practice via IRDA. In particular, the monopoly previously enjoyed by GIC (General insurance corporation of India) was removed in yr -2000 & First licensed were granted to private. Companies.”

Contribution of Insurance market in Indian Economy. Insurance generated RS 400 billion business in India , and together with banking services adds about 7% to India's GDP .Gross premium collection is about 2% of GDP and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world , and total investible funds with the LIC are almost 8%. of GDP. Yet more than three –fourths of India’s insurable population has no life insurance or pension cover. * Growth in major types of Insurance   Total Revenue earned (2007)

Life insurance Non life insurance $ 41.36 billion

$ 6.53 billion

compound annual growth rate

11.84 %

5.75 %

Premium contribution in 2011

$ 65.96 billion

$ 7.48 billion

What is Micro Insurance ? 

Micro-Insurance is a key element in the financial services packages for people at the bottom of the pyramid.



Micro insurance is a risk transfer device characterized by low premiums and more coverage limits, and designed for low-income people not served by typical social or commercial insurance schemes. It is a financial arrangement to protect low-income people against specific risk in exchange for risk involved.

Misconceptions on Micro Insurance   



Small insurance companies. Just another product offered by MFIs. Regular insurance products with smaller sums insured and premiums . Savings, credit, risk prevention.

Critical Features of Micro Insurance. 

Transactions are low-cost and reflect members’ willingness to pay.



Clients are essentially low-net-worth but not necessarily uniformly poor.



Communities are involved in the important phases of the process (such as package design and rationing of benefits).



The essential role of the network of micro insurance units is to enhance risk management of the members of the entire pool of micro insurance units over and above what each can do when operating as a stand-alone entity.

Need for Micro Insurance 

Poor also need insurance protection



Inclusive growth is the only way to ensure sustained growth



Trickle down effect of the process of economic growth benefiting the poor belied



Poor get excluded unless special effort is made to bring them into the development process



Monitor it effectively

Risk Priorities by low-income people Health Problems Death of breadwinner Death of family member Crop loss / bad harvest Theft; fire Natural disaster

ce n rta o mp I g n i Ris

IRDA’s Initiatives   





Developmental Initiatives:Legislature delegated developmental responsibilities – A unique model. Ensuring orderly growth and penetration of insurance are the prime objectives. Introduction of development oriented regulations to Bridge the Demand Supply gap.

Mandatory Norms :-

Rural Sector - Life Insurers  First 5 years - 7% to 16% of total policies underwritten  6th to 10th* year - 18% to 20% Non Life  First 5 years - 2% to 5% of total gross premium  6th to 10th* year - 5% to 7%. Social Sector - Life & Non Life  5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to 10th year*

Target Market. A

A Commercial Insurance for wealthy individuals and companies, as well as compulsory products.

B Wealthy

Middle Income

B Most of non-motor related commercial insurance.

C Low Income

Destitute / Severely Poor

D E

C Social security and public health services. D Aggregate market for microfinance providers. E Potential market for micro insurance.

Policyholders (the market):People do respond to “good” products. Generally lack understanding of insurance and thus require knowledge and appreciation . Education, marketing, policy documents MUST be simple and appropriate . We need to help people link needs with insurance as an

Critical Issues      

Illiteracy. Ignorance. Lack of complete information. Huge untapped rural market. Commutation & Communication. Lack of expertise.

THANK YOU