Insurance Business: focusing on tactical opportunities to improve their

Insurance Business: focusing on tactical opportunities to improve their performance in India. Abstract This study is conduct to know the approach of the insurance sector in Indian economy and to measure the performance, contribution and challenges faced by of the public and private companies of the insurance business. The state controlled insurance companies faced stiff competition from private insurance companies after post reforms period. The private insurance companies were able to exploit the shortcomings in the state run insurance companies. It is also possible through the study about their contribution and effective role played by the insurance industry in the development of economy. Study is relevant for clients, Govt, and financial institutions to judge their role and contribution in the insurance sector in Indian economy. Introduction: Key words: Contribution, performance, IRDA, premium Insurance sector in India has become a full circle from being an open competitive market to nationalization and back to a liberalized market. Tracing the developments in the Indian insurance sector reveals the 360- degree turn witnessed over a period in almost 195 years. The insurance industry originated in India in the year 1818 with the formation of life insurance Corporation in Calcutta. In 1870 Bombay mutual life insurance society established its insurance business and the same premium was charges for both Indian and English people. In 1912 the insurance sector came under the purview of regulations when the governments passed the life insurance companies act. But it was in the year 1938 when the government came up with the first legislation to bring the insurance sector under state control. In 1956, total 245 Indian and foreign insurers and provident societies taken over by the central government and formed nationalized LIC by an act of parliament viz, LIC Act 1956 with a capital contribution of Rs 5 crore from government of India. Now, Insurance industry in India is governed by insurance act, 1938, the Life Insurance Corporation Act,1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) act, 1999 and other related acts. The new economic policy adopted by the Government of India since 1991 allowed the private players to be in the business of insurance. Privatization of the insurance sector has encouraged many overseas insurance companies to open their branches in our country. The opening of the sector to the private companies has changed the performance. The private sector has to compete with the existing public sector companies in terms of the

performance and contribution in the insurance sector. Performance, contribution and challenges are complex phenomenon which depends upon a variety of intrinsic and extrinsic factors. Initially insurance industry was controlled by the government sector, however, in 1999-2000 the insurance market was opened to private and foreign investment. The insurance industry of India consists of 52 insurance companies of which 24 are in life insurance business and 28 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. Other stakeholders in Indian Insurance market include Agents (Individual and Corporate), Brokers, Surveyors and Third Party Administrators servicing Health Insurance claims. Out of 28 non-life insurance companies, 5 private sector insurers are registered to underwrite policies exclusively in Health, Personal Accident and Travel insurance segments. They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more specialised insurers belonging to public sector, namely, Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for Crop Insurance. There are many foreign players who are doing business in this sector. Some of the major foreign players are: - AIG, Aviva, MetLife, New York life, Prudential, Allianz, Sun life, Standard life and Lombard. These foreign players are present with small states in joint ventures with Indian companies for both life and non life segments. Reform process of Insurance Sector: Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. The risks which can be insured against include fire the perils of sea, death and accidents and burglary any risk contingent upon these may be insured against at a premium commensurate with risk involved. Modern insurance industry is a scientific product that is theoretically upgraded all the times, which offers different forms of practical usage in present and near future. The process of insurance sector reform started in April- 1993, by formation of Malhotra committee. On January-1994 Malhotra committee submitted their report to the finance minister. December -1996, IRDA bill introduced in the parliament and referred to the standing committee. August 1997- IRDA withdrawn following opposition to foreign participation. Govt. of India clears greater autonomy to LIC and GIC in the month of Nov -1997. Ultimately Union budget announces opening up of insurance sector on June- 1998. In January- 1999, Govt. notified IRDA as a statutory authority and in Oct 1999 approval of

IRDA bill by the cabinet with FDI limited to 26 %. Private insurance companies are back on Oct 2000. (Source- yojan-2000) The recommendation of Malhotra committee on the insurance regulatory and development authority was set up to monitor and control the insurance industry. Some of the initiatives taken by the government after insurance sector reforms are:- -Government to have not more than 50% state in insurance companies. -Insurance sector to be opened up for private companies and any number of insurance enterprises can operate. -Private players with minimum paid up capital of Rs. 1 billion should be given opportunity to do business. -Foreign companies can eater Indian market through joint ventures with Indian companies. Objectives of the study: The research paper has the following objectives:- 1- To analysis performance of insurance sector in India 2- To know about the major players in insurance sector 3- To find out contribution of insurance sector in Indian economy 4- To find out the challenge faced by the insurance sector. Statistical data: The entire study is divided into two time period. First time period is from 2001-02 to 2008-09 and from 2011-12 to 2012-13. The study will be based on secondary economic data published by the government of India, published by RBI, the official directory, publications of journal on economic and finance and news paper like economics times, business standard, business line, financial express and magazine etc. Statistical Tools: The data thus proposed to be mobilized will processed through the various measures of central tendencies, deviations, trends analysis, correlation, and percentages etc. so as to ascertain the trends and patterns. Analysis and Interpretation: The major market share in the field of life insurance is still dominated by life insurance Corporation (LIC). Life Insurance Corporation holds 78% share of the market. In the case of non life insurance field private sector companies both independently as well as joint ventures with foreign insurers account for 20% of the market and have growth at 60% p.a. Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 % annum. The outcome of liberalization over a period of five years has been positive in terms of the premium under written and the annual growth rate. During

the 2008-09 financial year life insurance premiums increased by an estimated 29.54% in real terms to INR 821.47 billion while num life insurance premiums rose 12.2% to INR 707.12 billion, The strong growth in 2008 did not come in isolation, growth in insurance premiums has been averaging at 12.3 % in real terms over the last decade. Insurance penetration of India i.e. premium collected by Indian insurers is 3.96 % of GDP in FY 2012-13. Per capita premium underwritten i.e. insurance density in India during FY 2012-13 is US$ 53.2. (A) From the point of view of Premium: 1- Life Insurance:-(Premiums of Life Insurance) The Country s 22 life insurance companies saw 29.5 per cent rise in premium collected through sale of new policies to Rs 3602 crore in April 2009, as against Rs2780 crore in the corresponding period last year. This is the fastest growth since April 2007. In case of LIC, which recorded 69.33 per cent growth in first- year premium during April, a bulk of the growth came from the group single premium segment, where the first premium income rose over six times to Rs 929.62 crore, as against Rs 151.13 crore in the corresponding period last year. Similarly, individual single premium rose to Rs 426.90 crore from Rs 366 crore in corresponding period of last year. As a result of the increase in premium collection, LIC s market share increased to 58.67 per cent. Even in case of SBI life, the second-largest life insurance company. Private players, first-year collection fell by 2.85 per cent in April. ICICI Prudential slipped from the second position to fifth in the April collection, with SBI life taking over as the largest private sector life insurance. Insurance have been focusing on profitability. They are consolidating their business by bringing down their expansion plans For instance, Reliance life has reported 30% dip in its first year premium as against 28% growth in 2008-09. ICICI Prudential is looking at consolidation. The Company posted Rs 577 crore net loss in 2008-09.

T: 1- TOTAL LIFE INSURANCE PREMIUM (Rs. Crore) Insurer companies 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 LIC 157288.04 149789.99 1278 22.84 90792.22 75127.29 63533.43 54628.4 9 49821.91 Aegon Religare 31.21 - - - - - - - Aviva 1992.87 1891.88 1147.23 600.27 253.42 81.50 13.47 Bajaj Allianz 10624.52 9725.31 5345.24 3133.58 1001.68 220.80 69.17 7.14 Bharti Axa 360.41 118.41 7.78 - - - - - Birla Sunlife 4577.59 3272.19 1776.71 1259.68 915.47 537.54 143.92 28.26 Canara HSBC 296.41 - - - - - - - DLF Pramerica 3.37 - - - - - - - Future Generali 152.6 2.49 - - - - - - HDFC Standard 5564.69 4858.56 2855.87 1569.91 686.63 297.76 148.83 33.46 ICICI Prudential 15356.22 13561.06 7912.99 4261.05 2363.82 989.28 417.62 116.38 IDBI Fortis 318.97 11.90 - - - - - - ING Vysya 1442.28 1158.87 707. 20 425.38 338.86 88.51 21.16 4.19 Kotak Mahindra 2343.19 1691.14 971. 51 621.85 466.16 150.72 40.32 7.58 Met Life 1996.64 1159.54 492. 71 205.99 81.53 28.73 7.91 0.48 Max New York 3857.26 2714.60 1500.28 788.13 413.43 215.25 96.59 38.95 Reliance Life 4932.54 3225.44 1004.66 224.21 106.55 31.06 6.47 0.28 51.0 Sahara 206.47 143.49 0 27.66 1.74 - - - 2928 SBI Life 7212.1 5622.14.49 1075.32 601.18 225.67 72.39 14.69 184. Shriram 436.17 358.05 17 10.33 - - - - Star Union 50.19 - - - - - - - Tata AIG 2747.5 2046.35 1367.18 880.19 497.04 253.53 81.21 21.14

Private Total 64503.22 51561.42 2825 3.00 15083.54 7727.51 3120.33 1119.06 272.55 Industry Total 221791.26 201351.41 1560 75.84 105875.76 82854.80 66653.75 55747.5 5 50094.46 Note: Figure in bracket indicates the growth over the previous year in percent. "-" indicates the company has not started its operation. T:2- TOTAL LIFE INSURANCE PREMIUM GROWTH (in %) Insurer companies 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 LIC 5.01 17.19 40.79 20.85 18.25 16.30 9.65 0.00 Aviva 5.34 64.91 91.12 136.87 210.95 505.19 0.00 0.00 Bajaj Allianz 9.25 81.94 70.58 212.83 353.66 219.19 868.99 0.00 Bharti Axa 360.41 118.41 7.78 0 0 0 0.00 Birla Sunlife 39.89 84.17 41.04 37.6 70.31 273.49 409.33 0.00 Canara HSBC 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00 DLF Pramerica 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.00 Future Generali 0.0 0.0 0.0 0.0 0.0 0.0 0.00 HDFC Standard 14.53 70.13 81.91 128.64 130.6 100.07 344.75 0.00 ICICI Prudential 13.24 71.38 85.71 80.26 138.94 10891.95-92.27 0.00 IDBI Fortis 0.00 ING Vysya 24.46 63.87 66.25 25.53 282.86 318.31 404.45 0.00 Kotak Mahindra 38.56 74.07 56.23 33.4 209.29 273.78 431.97 0.00 Met Life 72.19 135.34 139.19 152.65 183.75 263.22 1548.77 0.00 Max New York 42.09 80.94 90.36 90.63 92.07 122.84 147.98 0.00 Reliance Life 52.93 221.05 348.1 110.42 243.09 380.3 2231.77 0.00 Sahara 43.89 181.34 84.38 1493.86 0.0 0.0 0.0 0.00 SBI Life 28.28 91.98 172.34 78.87 166.4 211.76 392.89 0.00 Shriram 21.82 94.41 1683.57 0.0 0.0 0.0 0.0 0.00

Star Union 0.0 0.0 0.0 0.0 0.0 0.00 Tata AIG 34.26 49.68 55.33 77.09 96.05 212.19 284.15 0.00 Private Total 25.1 82.5 87.31 95.19 147.65 178.83 310.59 0.00 Industry Total 10.15 29.01 47.38 27.78 24.31 19.56 11.28 0.00 2- Premium of Non life Insurance:- The non life insurance sector comprising PSUs and private players has sustained its composite growth rates in premium income for three consecutive April December periods.(calender years 2007,2008 and2009).according to data released by IRDA the non-life sector witnessed a9.95% growth in premiums during the first nine months of the current fiscal against 10.24% in the previous corresponding period. The Gross premium underwritten by public sector non life insurance for the April- Dec-2009 period posted year-on year growth of 11.37% as compared to the year on year growth of 7.93% posted by private sector non life insurance. Overall, the non life insurance sector grew 9.95% in April-Dec -2009 compared to the corresponding period last year. The private sector general insurance saw growth rates decline steadily from 27% during April- Dec 2007 to 14% during the corresponding period in 2008 and now stand at 8% in 2009. GROSS DIRECT PREMIUM OF NON-LIFE INSURANCE (WITHIN & OUTSIDE INDIA) (Rs. Crore) Insurer 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 National 4295.85 4021.97 3827.12 3536.34 3810.65 3399.97 2869.87 2439.41 New India 6455.79 6151.97 5936.78 5675.54 5103.16 4921.47 4812.79 4198.06 Oriental 4077.90 3900.22 4020.78 3609.77 3090.55 2899.74 2868.15 2498.64 United 4277.77 3739.56 3498.77 3154.78 2944.46 3063.47 2969.63 2781.48 Public Total 19107.31 17813.71 17283.45 15976.44 14948.82 14284.65 13520.44 11917.59 Bajaj Allianz 2619.29 2379.92 1786.34 1272.29 851.62 476.53 296.48 141.96 Bharti AXA 28.50 0.00 - - - - - - Cholamandala m 685.44 522.34 311.73 220.18 169.25 97.05 14.79 - Future Generali 186.49 9.81 - - - - - - HDFC Ergo 339.21 220.60 194.00 200.94 175.63 112.95 9.49 - ICICI Lombard 3402.04 3307.12 2989.07 1582.86 873.86 486.73 211.66 28.13

Iffco-Tokio 1374.06 1128.15 1144.47 892.72 496.64 322.24 213.33 70.51 Reliance 1914.88 1946.42 912.23 162.33 161.68 161.06 185.68 77.46 Royal Sundaram 803.36 694.41 598.20 458.64 330.70 257.76 184.44 71.13 Shriram 113.76 - - - - - - - Tata AIG 823.92 782.64 710.55 572.70 448.24 343.52 233.93 78.46 5.27 10.15 24.07 27.77 30.48 46.85 198.17 0.00 Universal Sompo 30.14 0.48 - - - - - - Private Total 12326.36 10991.89 8646.57 5362.66 3507.62 2257.83 1349.80 467.65 Total 31433.67 28805.60 25930.02 21339.10 18456.45 16542.49 14870.25 12385.24 (9.11) (11.09) (21.51) (15.62) (11.57) (11.25) (20.06) (17.97) Specialised Insurers AIC 833.44 835.11 564.67 555.83 549.72 369.21 - - ECGC 744.68 668.37 617.66 577.33 515.55 445.48 374.78 338.52 Stand-alone Health Insurers Star Health 509.86 168.19 22.51 - - - - - 203.1463 647.15645 0.00 Apollo DKV 48.14 2.97 - - - - - - Figure in the bracket represent the growth over the previous year in percent.

"-" indicates the company has not started its operation. GROSS DIRECT PREMIUM OF NON-LIFE INSURANCE (WITHIN & OUTSIDE INDIA) (Growth %) Insurer 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 National 6.81 5.09 8.22-7.20 12.08 18.47 17.65 0.00 New India 4.94 3.62 4.6 11.22 3.69 2.26 14.64 0.00 Oriental 4.56-3.00 11.39 16.8 6.58 1.1 14.79 0.00 United 14.39 6.88 10.9 7.14-3.88 3.16 6.76 0.00 Public Total 7.26 3.07 8.18 6.87 4.65 5.65 13.45 0.00 Bajaj Allianz 10.06 33.23 40.4 49.4 78.71 60.73 108.84 0 Bharti AXA 28.5 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Cholamandalam 31.23 67.56 41.58 30.09 74.4 556.09 0 0.00 HDFC Ergo 339.21 220.6 194 200.94 175.63 112.95 9.49 0.00 ICICI Lombard 2.87 10.64 88.84 81.13 79.54 129.96 652.55 0.00 Iffco-Tokio 21.8-1.43 28.2 19.75 54.12 51.05 202.55 0.00 Reliance -1.62 113.37 461.96 0.4 0.39-13.26 139.7 0.00 Royal Sundaram 15.69 16.08 30.43 38.69 28.3 39.75 159.31 0.00 Tata AIG 5.27 10.15 24.07 27.77 30.48 46.85 198.17 0.00 Private Total 12.09 27.12 61.24 52.89 55.35 67.27 188.64 0.00 Total 9.11 11.09 21.51 15.62 11.57 11.25 20.06 17.97 Specialised Insurers AIC -0.2 47.89 1.59 1.11 48.89 0.0 ECGC 11.42 8.21 6.98 11.99 15.73 18.87 10.71

(B) Market Share of Insurance companies: Indian life insurance market has become more vibrant. Competition in this market is increasing with companies continues effort to lure the customer with new product offering. However, the market share of private insurance companies remains in the 10-15% range. Even today, Life Insurance corporation (LIC of India dominates Indian insurance sector and in the year 2007-08 it has sold 3.75 crore policies collecting Rs.43813 crore as premium. The Heavy hand of government still dominates the market, with price controls, limits on ownership and other restraints. Total Industry Market Share (%) Company Market Share of Life Insurance- 2003-04 2004-05 2005-06 2006-07 2007-08 ICICI Prudential 4.71 8.80 10.71 10.62 13.70 Bajaj Allianz 1.20 2.70 6.21 7.40 10.31 SBI Life 0.80 2.40 2.23 4.20 6.23 HDFC Standrad 1.00 1.10 3.71 3.12 4.12 Reliance Life nil 0.20 0.41 1.72 4.02 Birla Sunlife 3.10 3.60 2.91 1.91 3.42 Max New York 0.90 1.30 2.01 1.82 2.41 Kotak OM 0.70 1.30 1.76 1.32 1.92 Aviva 0.50 1.10 1.83 1.61 1.80 Tata AIG 1.30 1.80 2.35 1.30 1.50 Met Life 0.20 0.30 0.61 0.8 1.40 ING Vysya 0.50 1.60 1.23 1.00 1.20 Shriam Life Nil Nil 0.00 0.20 0.30 Bharti AXA Nil Nil nil 0.00 0.21 Sahara Life Nil 0.00 0.00 0.12 0.11 IDBI Fortis Nil Nil nil 0.00 0.00 Private Players (total) 14.96 26.34 35.55 37.00 51.90 LIC 85.10 73.72 64.50 63.00 48.10

Economic Times Market Share of Non Life Insurance: New India Insurance, National Insurance,oriental Insurance and united india Insurance had combined market share of 73.47% as of oct 2005.ICICI prudential life insurance company continues to lead the private sector with 7.26% market share in terms of fresh premium, whereas ICICI Lombard general insurance company is the leader among the private non-life players with a 8.11% market share. ICICI Lombard has focused on growing the market for general insurance products and increasing penetration within existing customers through product innovation and distribution. Market Share (%) Company 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Royal Sundram 0.57 1.24 1.56 1.79 2.15 2.4 2.85 Tata -AIG 0.63 1.57 2.08 2.43 2.87 2.97 3.10 Reliance General 0.63 1.25 0.97 0.88 0.76 3.95 6.93 IFFCO-Tokio 0.57 1.43 1.95 2.69 4.20 4.6 4.95 ICICI-Lombard 0.23 1.42 2.94 4.73 7.46 12.01 12.90 Bajaj Allianz 1.15 1.99 2.88 4.61 6.02 7.22 8.20 HDFC CHUBB 0.00 0.06 0.68 0.95 0.96 0.76 0.85 Cholamandalam 0.00 0.10 0.59 0.92 1.04 1.26 2.00 New India 33.90 32.37 29.75 27.65 26.60 20.09 19.15 National 19.70 19.30 20.55 20.65 16.57 15.24 13.98 United India 22.46 19.97 15.52 15.95 14.78 14.04 13.14 Oriental 20.17 19.29 17.53 16.75 16.92 15.76 14.26 Source:IRDA

(C) India s Insurance Market::- Insurance Is a Rs450 Billion business in India s and together with banking adds about 7% to India s gross domestic product (GDP).The Gross premium collection is about 2% of GDPand growing between 15% and 20% Per annum.india also has highest number of life insurance policies in force in the word. The rapid growth of the insurance sector over the last decade, insurance in India remains at an early stage of development. At the end of2009-10 the Indian insurance market (in terms of premium volume) was the12th largest in the world. Here are some performance highlights of the Indian insurance industry. Life Insurance Business Performance: 2012-13 2011-12 Public Sector Private Sector Public Sector Private Sector Premium Underwritten (Rs in Crores) 208803.58 78398.91 202889.28 84182.83 New Policies Issued (in Lakhs) 367.82 74.05 357.50 84.42 Number of Offices 3526 6759 3455 7712 Benefits Paid (Rs in Crores) 134922 57571 117497 35635 Individual Death Claims (Number of Policies) 750576 127906 731336 122864 Individual Deatlaims Amount Paid (Rs in Crores) 7222.90 2147.32 6559.51 1849.23 Group Death Claims (Number of lives) 245467 119970 244314 158093 Group Death Claims Amount Paid (Rs in Crores) 1697.37 949.08 1586.75 794.99 Claim Settlement Ratio (in percent) 99.25 99.74 97.42 89.34 Non-Life Insurance Business Performance: 2012-13 2011-12 Public Sector Private Sector Public Sector Private Sector Premium Underwritten (Rs in Crores) 35022.12 27950.69 30560.74 22315.03 New Policies Issued (in Lakhs) 689.68 380.56 528.41 329.3 Number of Offices 6190 1466 5281 1394 Incurred Claim Ratio 79.56 84.79 89.22 88.22 Number of Grievances 20164 60358 12721 82790 Grievances Resolved During the Year 19057 60230 11110 82741 Grievance Resolved (in percent) 94.51 99.79 87.33 99.94 Source: Annual Report on Insurance The dynamic growth of insurance buying is partly affected by the changing income elasticity of insurance demand. It has been shown that insurance penetration and per capita income have a strong non-linear relationship. Based on this relation and other considerations, it can be postulated that by 2014 the penetration of life insurance in India will increase to 4.45 and that of non-life insurance to 0.9%.

Projection of life insurance and non-life insurance premiums,2004-2014 Life Insurance Non Life Insurance S. No Year INR m INR m Constant 2004 prices INR,M INR m Constant 2004 prices 1 2004 749971 749971 203856 203856 2 2005 871672 834136 234323 224233 3 2006 1025957 934358 271830 247561 4 2007 1201425 1042105 315522 273680 5 2008 1403362 1159284 368094 304074 6 2009 1667814 1312134 429750 338101 7 2010 1983051 1485832 496953 372350 8 2011 2366576 1688756 572727 408690 9 2012 2804561 1905996 651736 442924 10 2013 3326543 2153072 734778 475578 11 2014 3947899 2433546 828433 510659 Average growth rate between2004-2014 18.10% 12.50% 15.10% 9.60% Source:Swiss Re Economic Research & Consulting (D) Challenges in the Insurance Sector : Insurance is a growing sector in India and accordingly the challenges will also be going on. Insurance industry has a numerous challenges like: low level of awareness, branding, distribution and perhaps increasing the penetration of insurance is probably the single largest challenge. Not only is just over one fourth of the insurable population of this country actually insured, but also most of those who possess insurance could well be underinsured. The challenges of the insurance sector are discussed below.

1) Low Level of Awareness: In India, literacy level is low in rural and semi urban areas. The people are not aware about the insurance policy. According to the study conducted by FORTE there is only- 73% of the population does not have life insurance in rural areas, In India rural areas contribution is just about 54.7% of the total of LIC S policies, and the penetration rate for non life is only 14% mainly for motor(tractor) insurance. 2) Branding of Product: One way insurance companies are tackling the challenge is by attempting to extend their product lines to include a host of financial service offerings and then reinventing their brands to support this extension. In general, however, most are struggling in the face of several obstacles chief among them the ability to build credibility as financial services providers while meeting customer s expectations of what it means to be a financial service company. To make headway will require that insurance companies manage their brands as strategic assets. Namely, they must determine how to leverage their brands to achieve their growth objective in the broader financial service market without diluting their existing brand equity, causing customer confusion and alienating their core customer base. 3) Distribution Channel: Managing the expectations of channel partners viz, banks, corporate agents, brokers and advisory force and keeping the acquisition costs at manageable proportions at the same time will help the new players reach breakeven relatively sooner increased rural penetration of insurance will also be a fallout of the above factors and will depend upon the spread that the distribution footprint will help the insurer achieve. 4) Technological advancement: Technological advancement will be critical to functions like data management, under writing, fund management, actuarial efficiency and the end to end service delivery process.technology will provide the cutting edge in terms of improved disclosure to the policy holder as well as the regulator in due course of time. 5) Level of Human Resource: Insurance is and intensively people-oriented business and human resources will be the undoubted differentiator like in any other retail industry. The quality of manpower attached and retained by insurer and how their abilities and ambitions are harnessed would be the litmus test for the industry. 6) Acquisition Costs : Acquisition costs which is sum total of technological, operational and distribution costs, will be the key differentiating factor in initial years. While the initial hits on the

technology and process costs have already been absorbed by majority of the new insurers, intermediary costs of distribution is critical variable. The intermediary costs to distribution channel partners are also lower due to the bargaining power that the strong brand possesses in life insurance. (E) Issue In Insurance Sector In India: Earning growth, strong operating fundamentals and record underwriting profits are all hallmarks of the sustained performance the insurance industry achieved in the past few years. Recently, the industry s solid footing has been weakened by an unprecedented chain of financial and economic events. As they head into2009, insurers will not be able count on continued investment returns to drive result and need to carefully scrutinize the overall effectiveness of their operations. The business issues like being competitive in a price driven market, maintaining compliance with changing statutory, federal and international regulations, creating a consistent customer experience that promotes customer acquisition and retention, promoting "ease of use" across varied lines of business and distribution channels, effectively mitigating and managing regulatory reviews, fines and penalties, managing product development and life cycle components effectively, increasing growth with decreasing levels of support resources, increasing work automation, process efficiency and continuous improvement opportunities, building consistent processes that can be extended across products or lines of business, optimizing legacy and mainframe system environments that will influence continued success and focusing on tactical opportunities to improve their business performance. Conclusion: In the present time, the insurance sector is playing an important role in changing the economic scenario of the country. Actually the success of insurance sector will primarily depend upon the meeting the rising expectations of the consumers who will be the real king in the liberalized insurance market in future. The insurance will need to increase effort to launch to new advanced products that are suitable for the market and making use to reach every part /people of the country. The private sector will play a key role in serving large number of in formal sector workers. In addition the insurance companies will need to show long term commitment to this sector. To design the product are suitable for the ruler population and utilize appropriate distribution mechanism. Insurance must have to pay special attention for the characterization of the rural labour force like the prevalence of irregular income streams and preference for simple products, before they can successfully penetrate this life and non life insurance sector.

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