Insurance

Insurance is a means of protection from

financial loss. It is a form of risk management
primarily used to hedge against the risk of a
contingent, uncertain loss. ... The amount of
money charged by the insurer to the insured for
the coverage set forth in the insurance policy is
called the premium.
 Insurance in India
Insurance in India refers to the market for insurance
in India which covers both the public and private
sector organisations. It is listed in the Constitution of
India in the Seventh Schedule as a Union List subject,
meaning it can only be legislated by the Central
government. India allowed private companies in
insurance sector in 2000, setting a limit on FDI to
26%, which was increased to 49% in [Link],
the largest life-insurance company in India, Life
Insurance Corporation of India is still owned by the
government and carries a sovereign guarantee for all
insurance policies issued by it.
 History
• Insurance in its current form has its history dating back until 1818,
when Oriental Life Insurance Company was started by Anita Bhavsar
in Kolkata to cater to the needs of European community. The pre-
independence era in India saw discrimination between the lives of
foreigners (English) and Indians with higher premiums being charged
for the latter. In 1870, Bombay Mutual Life Assurance. The Life
Insurance Companies Act, 1912 made it necessary that the premium-
rate tables and periodical valuations of companies should be certified
by an actuary. The oldest existing insurance company in India is
the National Insurance Company , which was founded in 1906, and is
still in business. The LIC had monopoly till the late 90s when the
Insurance sector was opened to the private sector. Before that, the
industry consisted of only two state insurers: Life Insurers (Life
Insurance Corporation of India, LIC) and General Insurers (General
Insurance Corporation of India, GIC]
 Industry structure
By 2012 Indian Insurance is a US$72 billion industry. However,
only two million people (0.2% of the total population of
1 billion) are covered under Mediclaim. With more and more
private companies in the sector, this situation is expected to
change. The majority of Western Countries have state run
medical systems so have less need for medical insurance. In
the UK, for example, the corporate cover of employees, when
added to the individual purchase of coverage gives
approximately 11–12% of the population on cover due largely
to usage of the state financed National Health Service (NHS),
whereas in developed nations with a more limited state
system, like USA, about 75% of the total population are
covered under some insurance scheme.
 Merger and acquisition activity
gathers momentum in Insurance

The Indian insurance sector has, of late, been

witnessing a spate of mergers and acquisitions
(M&As) with many joint venture partners expressing
their intent to look for new partners.

Over the past time, there have been at least six

instances of stakeholders in insurance ventures
expressing their desire to exit. These included Exide
Life Insurance, Future Generali India Life Insurance
and DHFL Pramerica Life.
• M&A activity in insurance began to be noted from January
2013, after Exide Industries, India's largest producer of
automotive and industrial batteries, decided to acquire ING
Group's stake in ING Vysya Life Insurance. Exide, which had a
50 per cent of the equity capital of ING Vysya Life Insurance,
decided to acquire the remaining stake in the insurance firm.
This saw ING Group exit its insurance business in India. Later,
in May 2014, ING Vysya Life Insurance Company Ltd was
renamed Exide Life Insurance Company.
• Similarly, in July 2013, realty major DLF signed an agreement
to sell its 74 per cent stake in its life insurance joint venture,
DLF Pramerica Life Insurance, to Dewan Housing Finance
Limited (DHFL). DLF had then said this transaction was in line
with its ongoing strategy to divest non-core businesses/
assets.
In December 2013, the deal was completed and the company
was re-named DHFL Pramerica Life Insurance.
There has also been a case of a merger deal being called off.
More than a year after Larsen & Toubro (L&T) General Insurance
and Future Generali India Insurance announced a joint venture
combining both the companies' businesses, L&T in April 2014
said the parties had decided to call off the venture. Sources had
said this was due to valuation issues around the new venture.

In March 2013, L&T, Future Group and Generali Group had

signed a non-binding term sheet for the merger of L&T General
Insurance and Future Generali India Insurance. This was the
first-of-its-kind merger that was proposed in the insurance
sector. Were the merger to happen, L&T would have held a 51
per cent stake, Generali Group 26 per cent stake and 23 per cent
was to be held by Future Group in the merged entity. This deal
was to be approved by the Insurance Regulatory and
Development Authority (IRDA) and needed to have a nod from
the court as well as the Competition Commission of India.
• Insurance sector officials said the gestation period
in insurance is quite long.

"Players need to invest at least 8-10 years in a

venture for it to become profitable. Making profits
in a short duration is not a possibility. Hence, we are
seeing more cases of exit intentions. Especially for
foreign partners when the FDI incentive is not
present, there is no major reward to stay invested if
they are not cash-rich," said a senior life industry
executive.
 General Insurance
• Insurance contracts that do not come under the
ambit of life insurance are called general insurance.
The different forms of general insurance are fire,
marine, motor, accident and other miscellaneous
non-life insurance.
Life Insurance
• Life insurance is a protection against financial loss
that would result from the premature death of an
insured. The named beneficiary receives the
proceeds and is thereby safeguarded from the
financial impact of the death of the insured. The
death benefit is paid by a life insurer in consideration
for premium payments made by the insured.
 Life insurance companies
• Aviva India
• Bajaj Allianz Life Insurance
• Bharti AXA Life Insurance
• Birla Sun Life Insurance Company Limited
• Exide Life Insurance
• HDFC Standard Life Insurance Company
• ICICI Prudential Life Insurance
• IDBI Federal Life Insurance
• Life Insurance Corporation of India
• PNB MetLife India Insurance Company Limited
• SBI Life insurance co Ltd
 General Insurance Companies
• Agriculture Insurance Company of India
• The Oriental Insurance Company
• United India Insurance Company
• National Insurance Company
• Export Credit Guarantee Corporation of India
• Apollo Munich Health Insurance
• Bajaj Allianz General Insurance
• Bharti AXA General Insurance
• HDFC ERGO General Insurance Company
• ICICI Lombard
• L&T General Insurance
• Reliance General Insurance
• Royal Sundaram General Insurance
 Market Capture by Public and Private
Sector in Insurance in India
• The total market size of the insurance sector in
India is projected to touch US$ 350-400 billion by
2020.
• The life insurance market grew from US$ 10.5
billion in FY02 to US$ 27.5 billion in FY16
• Over FY02–FY16, life insurance premiums expanded
at a CAGR of 7.5 per cent.
• The life insurance industry has the potential to grow
2-2.5 times by 2020 in spite of multiple challenges
supported by long-term trends and fundamentals
underlying household savings.
• The insurance industry of India consists of 53 insurance
companies of which 24 are in life insurance business
and 29 are non-life insurers. Among the life insurers,
Life Insurance Corporation (LIC) is the sole public sector
company. Apart from that, among the non-life insurers
there are six public sector insurers. In addition to these,
there is sole national re-insurer, namely, General
Insurance Corporation of India (GIC Re). Other
stakeholders in Indian Insurance market include agents
(individual and corporate), brokers, surveyors and third
party administrators servicing health insurance claims.
• Out of 29 non-life insurance companies, five private
sector insurers are registered to underwrite policies
exclusively in health, personal accident and travel
insurance segments.
 Government Initiatives
The Union Budget of 2017-18 has made the following provisions
for the Insurance Sector:
• The Budget has made provisions for paying huge subsidies in
the premiums of Pradhan Mantri Fasal Bima Yojana (PMFBY)
and the number of beneficiaries will increase to 50 per cent in
the next two years from the present level of 20 per cent. As
part of PMFBY, Rs 9,000 crore (US$ 1.35 billion) has been
allocated for crop insurance in 2017-18.
• By providing tax relief to citizens earning up to Rs 5 lakh (US$
7500), the government will be able to increase the number of
taxpayers. Life insurers will be able to sell them insurance
products, to further reduce their tax burden in future. As
many of these people were understating their incomes, they
were not able to get adequate insurance cover.