INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW

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1 INTERNATIONAL JOURNAL OF MANAGEMENT RESEARCH AND REVIEW ABSTRACT LIFE INSURANCE MARKET IN INDIA: A REVIEW Dr. Rashmita Sahoo* 1, Dr. Anshuman Swain 1 1 Lecturer, Department of business Administration, Utkal University, Vanivihar, Bhubaneswar, Odisha. With over a billion people, India is fast becoming a global economic power. With a relatively youthful population, India will become an attractive life insurance market over the next decades. A very rapidly growing private life insurance market has developed in India. This private sector bridges most of the gaps between what government offers and what people need. The potential for growth of insurance industry in India is immense as nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be well below international standards. Insurance Regulatory and Development Authority (IRDA) has been established under IRDA Act, 1999 to regulate the insurance business in India. The new economic policy and liberalization process followed by the Government of India since 1991 paved the way for privatization of insurance sector in the country. As a result, private sector has been allowed entry in life insurance sector in India. Life insurance industry expanded tremendously from 2000 onwards. Life insurance as it is different from other segments of insurance business. INTRODUCTION In 1937, the Government of India set up a consultative committee. Mr. Sushil C. Sen, a well known solicitor of Calcutta, was appointed the chair of the committee. In 1938, the Insurance Act was passed. This piece of legislation was the first comprehensive one in India. It covered both life and general insurance companies. Life insurance in the modern form was first set up in India through a British company called the Oriental Life Insurance Company in 1818 followed by the Bombay Assurance Company in 1823 and the Madras Equitable Life Insurance Society in All of these companies operated in India but did not insure the lives of Indians. They were insuring the lives of Europeans living in India. In 1956, Government of India brought together 245 Indian and foreign insurers and provident societies under one nationalised monopoly corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. Insurance is a federal subject in India and Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, *Corresponding Author 920

2 Now India attracts the attention of every major insurer. The country started in 20 th place in the global insurance league table when the market opened to private players in 2000, and it moved up to 11th place in REVIEW OF LITERATURE Among early studies, Arora (2002) highlighted that LIC was likely to face tough competition from private insurers having large established network and their trained intermediaries throughout India. Verma (2003) analyzed the various type of products offered by public sector giant and the new global players in the private sector. Kumar and Taneja (2004) highlighted the opportunities and challenges before the insurance industry in India due to liberalization, globalization and privatization. Kulshrestha and Kulshrestha (2006) highlighted that demand for life insurance in rural India was expanding at the annual rate of 18 per cent as compared to 3.9 per cent in urban areas which provided good opportunity for life insurers to perform. OBJECTIVES OF THE STUDY To analyze the overall performance of Life Insurance Industry of India To study the Market Potential for life Insurance Business in India. RESEARCH METHODOLOGY The paper is absolutely a theoretical one whose fundamental comes from various secondary sources like research articles in Journal, published and unpublished scholarly papers, and books, various international and local journals, speeches, newspapers and websites. The analysis part of the paper is based on the statistical data provided by IRDA. For the analysis of data, statistical tools like percentages, ratios, growth rates and coefficient of variation have been used. ANALYSIS AND DISCUSSION The insurance sector is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country. Copyright 2012 Published by IJMRR. All rights reserved 921

3 List of Life Insurance Companies are operating in India as on 31 st March 2012 S. No Name of The Company Year of Incorporation 1 Life Insurance Corporation of India HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd Max New York Life Insurance Co. Ltd Bajaj Allianz Life Insurance Company Limited Birla Sun Life Insurance Co. Ltd ING Vysya Life Insurance Company Ltd Kotak Mahindra Old Mutual Life Insurance Limited Met Life India Insurance Company Ltd SBI Life Insurance Co. Ltd Tata AIG Life Insurance Company Limited Aviva Life Insurance Company India Limited Reliance Life Insurance Company Limited Sahara India Life Insurance Co, Ltd Shriram Life Insurance Co, Ltd Bharti AXA Life Insurance Company Ltd Future Generali India Life Insurance Company Ltd IDBI Federal Life Insurance Company Ltd Star Union Dai-ichi Life Insurance Co. Ltd Canara HSBC Oriental Bank of Commerce Life 2008 Insurance Company Ltd. 21 AEGON Religare Life Insurance Company Limited DLF Pramerica Life Insurance Co. Ltd IndiaFirst Life Insurance Company Limited Edelweiss Tokio Life Insurance Co. Ltd Life insurance policy in India is mounting speedily ever since the sector opened up for the private and foreign players. The industry is in the throes of competitive market forces. Unlike several industries like telecommunication and oil industry, insurance is not a high capital cost industry. This industry is put up on a good will and on access of distribution set-up. Growth of Business in India The following bar diagram illustrates the growth of life insurers in terms of policies and growth of LIC is more consistent as compared to private life insurers. Life insurance industry recorded a premium income of crore during as against crore in the previous financial year, registering a growth of 7.23 per cent. During , the growth in renewal premium was 6.22 per cent. Copyright 2012 Published by IJMRR. All rights reserved 922

4 Source: Annual Report of IRDA New Policies Source: Annual Report of IRDA In , life insurers issued 482 lakh new policies. LIC issued 370 lakh policies and the private life insurers issued 111 lakh policies.at the same time LIC suffered a decline of 4.70 per cent (8.21 per cent increase in ) in the number of new policies issued against the previous year, the private sector insurers reported a major decline of per cent (4.32 per cent decline in ) in the number of new policies issued. Operating Expenses The operating expenses of the life insurers increased by per cent in (11.84 per cent in ). The operating expenses towards life insurance business were 32,942 crore in as against 28,888 crore in Investment Income In the case of LIC, the investment income including capital gains was at 95,867 crore in compared to 1,12,425 crore in In the case of private insurers, the investment income including capital gains was at 25,479 crore in , as compared Copyright 2012 Published by IJMRR. All rights reserved 923

5 to42,826 crore in As a percentage of total income, it constituted per cent in Profits of Life Insurers In financial year , the life insurance industry reported net profit of 2,657 crore as against net loss of 989 crore in Out of the 23 life insurers in operations during , twelve companies reported profits (i.e. LIC, ICICI Prudential, Birla Sunlife, Max New York, Bajaj Allianz, SBI, Kotak Mahindra, TATA AIG, MetLife, Aviva, Sahara India and Shriram. Life Insurance Corporation of India has reported net profit of 1,172 crore i.e., an increase of per cent over 1,061 crore in ). Potential of Life Insurance Industry in India With a vast population base and large untouched market, insurance industry is a huge opening area in India for national as well as foreign investors. India is the fifth largest life insurance market in the rising insurance economies globally. This remarkable growth in the market has been focused by liberalization, with new player's significantly attractive product awareness and promoting consumer education and information. The strong growth potential of the country has also made international players to look at the Indian insurance market. Moreover, saturation of insurance markets in many developed economies has made the Indian market more attractive for international insurance players. CONCLUSION Life insurance covers approx. 3% of the total Indian population. India desires that more company come in life insurance sector and cover a large population with life insurance. The Indian insurance industry is massively driven by higher disposable incomes, changing demographics, Government efforts, and launch of new products, lesser complexities and entry of foreign players. The sector is not only outpacing India's economic growth figures, but is also standing strong as an important financial division through turbulent times. As per industry estimates, insurance penetration in India stood at 5.1 per cent in fiscal While life insurance penetration was marked at 4.4 per cent during the year, The Rs 2.9 trillion (US$ 58.7 billion)-indian life insurance industry has emerged as the support of entire insurance space. The industry has registered remarkable growth since its privatisation in 2000.The insurance companies are becoming biggest investors in long growth infrastructure development projects and hence have a great Importance to the developing economy like India. Despite the progress, India s insurance sector remains very small compared with some of the major emerging markets. The insurance industry lags behind other economies in the baseline measure of insurance penetration. REFERENCES Arora RS. Financial Reforms and Service Sector A Study of Life Insurance Industry in India, In B.B. Tandon and A.K.Vashisht (Eds.), Financial Sector Reforms An Unpublished Agenda for Economic Development: New Delhi:Deep & Deep, Copyright 2012 Published by IJMRR. All rights reserved 924

6 Bhattacharya A. Challenges before Life Insurance Industry. Life Insurance Today 2005; 1 (8): 5-8. Chakraborty J. Private Life Insurance Companies in India: Growing Prospects and Challenges. Insurance Chronicle 2007; IRDA Annual Reports. Insurance Regulatory and Development Authority. IRDA Journal. Various Issues ( to ). John J. The War for Market Share: A View from India. Insurance Chronicle 2008; Kulshresth LR, Kulshresth A. Liberalization and Rural Insurance Prospects and Challenges. Life Insurance Today 2006; Various Issues ( to ) Sinha PK, Sahoo SC. Marketing of Life Insurance in India. Service Marketing, Himalaya Publishing House Taneja A, Kumar N. Insurance in India: Challenges and Opportunities. The Insurance Times 2004; 24(11): Verma V. New Trends in Product Design: An Overview of Life Insurance Products. The Insurance Times 2003; 23 (6): Copyright 2012 Published by IJMRR. All rights reserved 925