Insurance Industry in India

Insurance Industry in India.
Before we begin the analysis of Indian insurance industry, let us clear some basics on insurance.
 In the words of a layman, insurance means managing risk. For instance, in life insurance
segment, the insurance company tries to manage mortality (death) rates among the wide
array of clients.
 The insurance company works in a manner by collecting premiums from policy holders,
investing the money (usually in low risk investments), and then reimbursing this same
money once the person passes away or the policy matures. The greater the probability for
a person to have a shorter life span than the average mark, the higher premium that
person has to pay. The case is the same for all other types of insurance, including
automobile, health and property.
 Ownership of insurance companies is of two types:
 Shareholder ownership
 Policyholder ownership
Types of Insurance:
1. Life Insurance - Insurance guaranteeing a specific sum of money to a designated

beneficiary upon the death of the insured, or to the insured if he or she lives beyond a
certain age.
2. Health Insurance - Insurance against expenses incurred through illness of the insured.
3. Liability Insurance - This insures property such as automobiles, property and
professional/business mishaps.
History of Insurance in India
There is a lot that can be written on the history of insurance in India, but it would take up
a lot of your time and make this a long article.To put it in short, the insurance sector had
only government owned entities till a decade back. LIC (Life Insurance Corporation of
India) was the only life insurance provider. In the general insurance space there were
players like National Insurance, New India Assurance, Oriental Insurance and United
India Insurance which offered solutions. All this changed in the year 2000 when private
players were allowed to start operations. A host of private players entered this market and
have been aggressive ever since. As of now we have 23 life insurance companies and 24
general insurance companies. There are a number of new players who are awaiting
regulatory clearances and approvals to start their business in India in both the life and
general insurance sectors.
Current market Scenario
LIC is by far the biggest life insurance company in India both in terms of market share
and their presence in India – it is the only government owned entity. Most of the private
players, in both life and non-life sectors, have started business in India with the
partnership of established insurance players in the world. The expertise of these global
players help the Indian insurance company’s perform much better as they can replicate
the learning gained from other markets over a large period of time. The foreign partner in
any insurance company in India is not allowed to own more than 26% of the shares in
Indian insurance company as per IRDA regulations. We have seen big financial groups in
India like SBI, ICICI and HDFC enter this pace and become aggressive players. Other
famous corporate groups like the Tatas, Birlas and the Ambanis have also formed
insurance companies.
Industry analysis
Michael porter’s five competitive forces:
Competitive forces for insurance industry in India
1. Threats of intense segment rivalry:

Initially there was no competition at all in insurance sector in India before 2000 because only
few government sector companies were dominating the market and private entrance was
prohibited by the government. At present about 29 companies are in insurance sector in India.
LIFE INSURERS
Public Sector
Life Insurance Corporation of India
Private Sector
Allianz Bajaj Life Insurance Company Limited
Birla Sun-Life Insurance Company Limited
HDFC Standard Life Insurance Co. Limited
ICICI Prudential Life Insurance Co. Limited
ING Vysya Life Insurance Company Limited
Max New York Life Insurance Co. Limited
MetLife Insurance Company Limited
Om Kotak Mahindra Life Insurance Co. Ltd.
SBI Life Insurance Company Limited
TATA AIG Life Insurance Company Limited
AMP Sanmar Assurance Company Limited
Dabur CGU Life Insurance Co. Pvt. Limited
GENERAL INSURERS
Public Sector
National Insurance Company Limited
New India Assurance Company Limited
Oriental Insurance Company Limited
United India Insurance Company Limited
Private Sector
Bajaj Allianz General Insurance Co. Limited
ICICI Lombard General Insurance Co. Ltd.
IFFCO-Tokio General Insurance Co. Ltd.
Reliance General Insurance Co. Limited
Royal Sundaram Alliance Insurance Co. Ltd.
TATA AIG General Insurance Co. Limited
Cholamandalam General Insurance Co. Ltd.
Export Credit Guarantee Corporation
HDFC Chubb General Insurance Co. Ltd.
REINSURER
General Insurance Corporation of India
Due to presence of these many companies , there was a huge competition in this sector.
2. Threat of new entrants:

EXIT BARRIER
LOW HIGH
ENTRY Low, stable returns Low, risky returns
LOW
BARRIERS High, stable returns High, risky returns

(Insurance Industry)
HIGH
For the insurance companies in india, entry barriers are high and exit barriers are also
high because any insurance companies cannot be liquated because till each and every
policy is not matured, no firm can leave the market.
Also the foreign partner in any insurance company in India is not allowed to own more
than 26% of the shares in Indian insurance company as per IRDA regulations.
3. Threats of buyers growing bargaining power:

Due to presence of many companies in this sector, the buyers have the more choice to
select any specific company, buyers are price sensitive and if they don’t find the
insurance plans of the specific company, they can switch to another company.
4. Threats of substitute model:

There exist a lot of substitutes in the insurance industry. Majorly, the large insurance
companies provide similar kinds of services – be it auto, home, commercial, health or life
insurance.
5. Power of Suppliers:
Those who are supplying the capital are not that big a threat. For instance, if someone as
a very talented insurance underwriter is presently working for a small insurance
company, there exists a chance that any big player willing to enter the insurance industry
might entice that person off.

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Insurance Industry in India.

1. Life Insurance - Insurance guaranteeing a specific sum of money to a designated

History of Insurance in India

1. Threats of intense segment rivalry:

2. Threat of new entrants:

ENTRY Low, stable returns Low, risky returns

BARRIERS High, stable returns High, risky returns

3. Threats of buyers growing bargaining power:

4. Threats of substitute model:

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