LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW T.S.VIJAYAN Chairman, LIC of India President, Insurance Institute of India

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW THEME OF THE PRESENTATION Future challenges in Life Insurance Business in India

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW India is the seventh largest country in the world with a population of around 1100 million. India is the second most populous country in the world, next only to China. It has 28 states and 7 Union Territories with distinct cultural backgrounds. India is known for its diversity with multi varied socio-economic conditions and languages. It has many geographical features and a rich history. India is the largest democratic country in the world with a strong judicial framework.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW The middle class segment is 250 million strong. It has aspirations and is ambitious. India has the 4 th largest economy based on Purchasing Power Parity. Indian GDP is growing at an average of 9% over the last few years.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW The total individual policies serviced by all life companies in India are around 270 millions of which LIC alone has around 250 million. Total premium of all life companies is only about 4% GDP. It still leaves a lot of potential for the life companies to grow and prosper in India.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Since Independence, in 1947 India had followed a socialistic pattern of economy, wherein government intervention and investment were high. Even then there was a strong private sector participation since the time of Independence.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW The history of Life Insurance in India The birth and growth of the Insurance sector in India is quite breath taking. In the year 1818 the Oriental Life Insurance Company was started at Kolkata. In 1912 the Indian Life Assurance Companies Act was enacted as the first statute to regulate the Life Insurance Business.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW In 1938 the earlier legislation was consolidated and amended to become the Insurance Act with the objective of protecting the interests of the insuring public. In 1956, the LIC of India was formed under the LIC Act,1956 with a capital contribution of Rs. 5 crores i.e $ 1.2 million at current rates from the Government of India, nationalising 245 life insurance companies.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW In 1999, the Insurance Regulatory and Development Authority popularly known as IRDA was created by an act of the Parliament to regulate all insurance companies and businesses in India. IRDA has evolved into an effective regulator and it has facilitated the entry and growth of private players in the insurance sector. Since then the growth of the insurance industry in India has never been the same again.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Life Insurance is a sun rise industry in India. Many major international players are operating in collaboration with Indian partners. The Joint Ventures are backed by strong capital base and latest technology. The sector was opened up for private players in the year Currently there are 19 companies operating in India in addition to LIC of India. I am proud to state that LIC is the dominant player.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW LIC Highlights Assets as on : $ 185 billion No. of policies : 250 million No. of employees : 1,13,000 No. of agents : 1.2 million

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW After opening up of the sector the life insurance industry has grown leaps and bounds. The industry has earned $ 45 billion total premium income during the F.Y The life insurance companies are the largest institutional investors in India.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW The life insurance companies have brought in huge capital for investment and expansion. They have generated good employment opportunities, both direct and in-direct. The latest technology is being introduced by all the companies thereby improving the servicing standards.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Innovative and market driven products are being offered by all the companies. All companies are building the distribution channels with strong tied agency network. Alternate distribution channels are also being developed in order to strengthen the overall process of procuration of business and deliver of service. India has a total of 2.5 million agents of which 50% are with LIC alone. There is a sharp increase in the remuneration of life insurance professionals

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Challenges : Many Professionals and experts are in short supply. Man power requirement has increased manifold. Increase in salaries to employees leading to high levels of attrition. Retention of employees is a major challenge.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Challenges : Many India being a vast country and with huge population, is a challenge for the life companies. Designing products for the people of various economic strata is a daunting task indeed.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Prosperity of all companies depends upon their capability to innovate and include all sections of the society into their business portfolio. Micro Insurance and financial inclusion will be major challenges for all the companies. There is a shift from traditional endowment policies to unit linked policies.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW There is a shift from long term policies to short term. Customers are expecting higher returns and thereby a strong emphasis on unit linked plans. When stock markets are volatile can the life insurance companies overcome the turbulence? Are they equipped to tide over the storm?

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW One of the key drivers of the Indian economy has been the dramatic increase of the urban population. Urban India today is already more populous than the entire United States. By 2025, it will exceed the current population of the European Union. Apart from this, the real potential lies in the rural India where prosperity is on the rise Go Rural is the slogan for most of the companies in India today.

LIFE INSURANCE INDUSTRY IN INDIA - AN OVERVIEW Key Issues Building institutions for development of self regulation for better market conduct Development professionalism and organising research for industry to develop on scientific lines Ensuring profitability and return to stakeholders by cost competitive policies.

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