The history of Indian insurance industry:

Life Insurance

In 1818 the British established the first insurance company in India in Calcutta, the Oriental
Life Insurance Company. First attempts at regulation of the industry were made with the
introduction of the Indian Life Assurance Companies Act in 1912. A number of
amendments to this Act were made until the Insurance Act was drawn up in 1938.
Noteworthy features in the Act were the power given to the Government to collect statistical
information about the insured and the high level of protection the Act gave to the public
through regulation and control. When the Act was changed in 1950, this meant far reaching
changes in the industry. The extra requirements included a statutory requirement of a certain
level of equity capital, a ceiling on shareholdings in such companies to prevent dominant
control (to protect the public from any adversarial policies from one single party), stricter
control on investments and, generally, much tighter control.

In 1956, the market contained 154 Indian and 16 foreign life insurance companies. Business
was heavily concentrated in urban areas and targeted the higher echelons of society.
“Unethical practices adopted by some of the players against the interests of the consumers”
then led the Indian government to nationalize the industry. In September 1956,
nationalization was completed, merging all these companies into the so-called Life
Insurance Corporation (LIC). It was felt that “nationalization has lent the industry fairness,
solidity, growth and reach.” 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 Society became the first Indian insurer.

At the dawn of the twentieth century, many insurance companies were founded. In the year
1912, the Life Insurance Companies Act and the Provident Fund Act were passed to
regulate the insurance business. 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. However, the disparity still existed as discrimination between Indian and foreign
companies. The oldest existing insurance company in India is the National Insurance
Company, which was founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalising the Life
Insurance sector and Life Insurance Corporation came into existence in the same year. The
Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers and also 75
provident societies—245 Indian and foreign insurers in all. In 1972 with the General
Insurance Business (Nationalisation) Act was passed by the Indian Parliament, and
consequently, General Insurance business was nationalized with effect from 1 January 1973.
107 insurers were amalgamated and grouped into four companies, namely National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it commenced business on
1 January 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened 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). GIC had four subsidiary companies. With effect from December
2000, these subsidiaries have been de-linked from the parent company and were set up as
independent insurance companies: Oriental Insurance Company Limited, New India

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Assurance Company Limited, National Insurance Company Limited and United India
Insurance Company.

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the
life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: The market contained 154 Indian and 16 foreign life insurance companies.

General Insurance

The General Insurance industry in India dates back to the Industrial Revolution and the
subsequent increase in trade across the oceans in the 17th century. As for Life Insurance, the
British brought General Insurance to India, and a similar path was followed in the
development of this industry. A number of private companies were in existence for years
and years until, in 1971, the Indian Government decided that the public interest would be
served by nationalizing the industry, merging all the 107 companies into four companies,
depending on the sort of business transacted (Marine, Fire, Miscellaneous). These were the
National Insurance Company Ltd., the Oriental Insurance Company Ltd., the New India
Assurance Company Ltd., and the United India Insurance Company Ltd. located in Calcutta,
New Delhi, Bombay and Madras respectively. The General Insurance Corporation (GIC)
was set up in 1972 as a ‘holding’ company, having these four companies as its subsidiaries.

Some of the important milestones in the general insurance business in India are:1907: The
Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general
insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalize the general
insurance business in India with effect from 1st January 1973. 107 insurers amalgamated
and grouped into four companies that is the National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India
Insurance Company Ltd. GIC incorporated as a company.

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Present Scenario in the insurance sector

•Insurance agents are the main intermediaries in the Indian insurance market, but with
liberalization brokers will be an additional channel for selling insurance products.

•Brokers are likely to play a major role in ensuring clients get insurance covers tailor made
to suit their requirements at good terms.

•Fast growing middle class of 300 million who can afford insurance.

•Increasing financial strength of middle class with disposable income.

•Narrowing gap between rural and urban populace in terms of access to information and
services.

•More and more entrepreneurs in traditional and modern business areas.

•Increase in number of double income families leading to lifestyles and attitude changes

•Growth of rural market is at 4 times of urban markets.

•The potential of the Indian insurance market is huge with current life insurance penetration
being only 1.9 of the GDP.

•Insurance market is set to touch 25 billion by 2010 in India. (It was only 7.2 billion in 98-
99 survey. At that time India’s rank in annual premium was 23rd for Life insurance and
contribution in GDP was merely 1.4%). Presently it is still lower then develops economy but
increased to 2.61% of GDP in 2002. So immense opportunity can’t be ignoring.

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Major players in the insurance industry in India:

•Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) was established on 1 September 1956 to spread
the message of life insurance in the country and mobilise people’s savings for nation-
building activities. LIC with its central office in Mumbai and seven zonal offices at
Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and Bhopal, operates through 100
divisional offices in important cities and 2,048 branch offices.

LIC has 5.59 lakh active agents spread over the country. The Corporation also transacts
business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is associated
with joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company
Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur; and Life
Insurance Corporation (International), E.C. Bahrain. It has also entered into an agreement
with the Sun Life (UK) for marketing unit linked life insurance and pension policies in U.K.
In 1995-96, LIC had a total income from premium and investments of $ 5 Billion while GIC
recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC's income grew at a
healthy average of 10 per cent as against the industry's 6.7 per cent growth in the rest of
Asia (3.4 per cent in Europe, 1.4 per cent in the US). LIC has even provided insurance cover
to five million people living below the poverty line, with 50 per cent subsidy in the premium
rates. LIC's claims settlement ratio at 95 per cent and GIC's at 74 per cent are higher than
that of global average of 40 per cent. Compounded annual growth rate for Life insurance
business has been 19.22 per cent per annum.

•General Insurance Corporation of India (GIC):

The general insurance industry in India was nationalized and a government company
known as General Insurance Corporation of India (GIC) was formed by the Central
Government in November 1972. With effect from 1 January 1973 the erstwhile 107 Indian
and foreign insurers which were operating in the country prior to nationalization, were
grouped into four operating companies, namely(i)National Insurance Company Limited; (ii)
New India Assurance Company Limited; (iii) Oriental Insurance Company Limited; and (iv)
United India Insurance Company Limited. (However, with effect from Dec'2000, these
subsidiaries have been de-linked from the parent company and made as independent
insurance companies). All the above four subsidiaries of GIC operate all over the country
competing with one another and underwriting various classes of general insurance business
except for aviation insurance of national airlines and crop insurance which is handled by the
GIC. Besides the domestic market, the industry is presently operating in 17 countries
directly through branches or agencies and in 14 countries through subsidiary and associate
companies.

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Life Insurance Plans

Life insurance is an irreplaceable part of a sound financial plan. It helps in securing your
family’s financial future in case of an unfortunate event like your untimely death. It also
provides you with a financial backup in case of an accident or any other event which may
cause temporary or permanent disability and therefore loss of income.
Life insurance also helps as an investment tool. It builds your wealth in a planned manner to
meet your financial goals and future expenses such as buying a new house or paying for
your child’s education or marriage. It also helps plan for retirement.

Future Generali offers different kinds of simple-to-understand life insurance policies. These
plans will help meet your various needs such as protection, savings, investments, child’s
education, health etc.

Online plans

with widespread connectivity options, ever increasing internet speed and strong emphasis on
user data protection, modern consumers are increasingly opting to buy insurance online.
with no intermediary involved and direct communication with the company, the online
insurance products are considerably cheaper than their offline counterparts. company may
also provide assistance during the buying journey such as explaining terms in the proposal
form through tele-calling .for value-conscious customers who are aware of their insurance
needs and prefer to buy through a do-it-yourself process, future general life offers five
online policies, viz. big dreams plan, heart & health plan, cancer protect plan, easy invest
online plan and the flexi online term plan.

Savings plans
savings are a key to meeting your goals in life. We offer a range of saving plans which will
help you save to meet short term or long-term goals and provide a life cover at the same
time. So whether you intend to buy a car/house, send your child to a top B School or build a
corpus for your retirement, our savings products will help you achieve your goals in a
systematic and planned manner along with the added advantage of tax benefits.

Investment plans (ULIP)

Unit Linked Insurance Plans (ULIPs) give you the benefit of market-linked returns along
with a life insurance cover. ULIPs are wealth-building solutions that fulfil your medium or
long-term financial goals. These plans let you select and invest you money in equity and
debt funds that have low, medium or high risk depending on your risk taking ability.

Term insurance plans

The basic principle of life insurance is to provide financial protection to the family of the
insured person. Our Protection Plans are built on affordability and designed to protect you
and your family in case of unforeseen events like Disability, Death or Accidental Death.

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MARKETING OF INSURANCE IN INDIA

Insurance is in a manner of speaking the last frontier in the financial sector to open. It is also
a sector, which leads to benefits across the full spectrum, from the individual who now have
wider choices to the economy, which see increased savings, to the infrastructure sector,
which can look forward to long term funding being available. In an under-insured economy,
newer channels of distribution have to be utilized to intensify the reach of insurance both in
urban and rural markets. This will create huge employment opportunities not only within
insurance companies but also as agents and consultants of insurance companies.

Marketing Mix Policies

Different companies can choose to position themselves differently and hence the Marketing
Mix is different. However, there are certain common characteristics that one can cull out
from the possible strategies that companies adopt.

Product:

The development of flexible products to suit individual requirements is what will

differentiate the winners from the also-rans. The key to success is in providing insurance
solutions, not standardized insurance products. The concept of riders/optional benefits has
already been a huge innovation brought about by the new players, which has led to
customization of products for individual needs. However, companies may differentiate
themselves on the basis of product segments that they choose to focus on and excel in.

Place:

Different companies may however choose different channels and different geographies to
focus on. The channel options are - tied agency force, corporate agents and brokers and this
is an area where different companies will make different choices. Many companies like
HDFC Standard Life are focusing on all channels whereas companies like Max New York
Life are focusing on the tied agency force only.
Customer interface will be a key challenge for life insurance companies and includes every
that interaction that the customer has with the company, such as sales, new business
underwriting, policy servicing, premium payments, claim processing and so on. Technology
can play a crucial role in delivering the highest standards of service set by the company and
it will be imperative for any serious player to excel in all of these.

Price:

Price is a relevant differentiator only in two segments - pure term insurance and in pure
annuities. Here too, service delivery and financial strength will need to be present at a
minimum acceptable level for price to be a relevant differentiator. In case of savings
oriented products, long-term returns generated are more relevant than just the price of the
product. A focus on generating good investment performance and keeping a tight control on
costs help in generating good long-term maturity value for customers.
Norms have been laid down on all of these by IRDA and adhering to these while delivering
good returns will be a challenge.

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Promotion and Advertising:

The level of demand is latent and will have to be activated considerably. The market needs
to be developed. Greater awareness of insurance and the need to have it as a protection tool
rather than as a tax planning measure needs to be appreciated by the Indian people. Various
communication tools including advertising, direct marketing and road shows contribute to
all this and different companies take different approaches on these.

Process: Cashless settlement:

One of the most defining and customer-friendly changes that we’ve seen in recent years
relates to the way claims settlements are made. The advent of the third-party administrator
(TPA) regime has facilitated the transition to the hugely convenient era of cashless
settlement of health and auto insurance claims. TPAs are entities who process claims on
behalf of insurers: the IRDA licenses them after it is satisfied that they have the financial
strength, the trained manpower, the infrastructure and the skills to undertake this activity.
Likewise, with auto insurance, the TPA ties up with garages and authorized service centers
for cashless settlement of auto insurance claims.

Lower premiums:

The spirit of competition and the broadening of the risk experience of insurance companies
have contributed to a fall in premiums over the years. That’s because, other things being
equal, an insurer who covers the lives just of 10 people bears a higher risk than an insurer
who covers the lives of, say, 100 people. Further, a broader base will provide greater
efficiencies on costs such as distribution, management and claims. A broad basing of the
mortality experience, therefore, gives insurers the elbowroom to compete by lowering
premiums, and that trend is expected to continue.

Premium payment flexibility:

Insurers have imparted certain flexibility to premium payment options in order to address
this concern. For instance, one now have the option to pay your premiums upfront, which is
then carried forward for the tenure of the policy. The yearly premiums are drawn from the
initial corpus. Insurers have also introduced the concept of ‘automatic cover maintenance’ to
protect your policy from lapsing owing to your omission to pay your premium on time.
Under this, in the event of your not paying the premium, the insurer dips into your
investment account to the extent of the premium. Of course, this comes within in-built
drawback: your investment portion diminishes year on year to the extent of the amount paid
to cover your risk.

Physical Evidence:
This can play a significant role for marketing in the Indian scenario. Since Internet users are
comparatively lesser than countries such as US, the offline mode will be preferred in India.
Although the distribution model is largely agent-based, wherever the customer is in contact
with the company, this factor can play a significant role in luring the customer.

People:

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The most important factor that materializes sales and maintains customer relationships on a
long-term basis is this factor. No matter what distribution strategy a company adopts,
customer relationship has to be taken care of in order to maintain the customer base on a
long-term basis.

DISTRIBUTION CHANNELS IN INSURANCE SECTOR: -

An insurance cover is an intangible product evidenced by a written contract known as the

‘policy’. Insurers market various insurance covers either directly or through various
distribution Channels—individual agents, corporate agents (including Bancassurance) and
Brokers. The marketer in the distribution network is in direct interface with the prospect and
the customer. Life insurance products are sold through individual agents and many of them
have this as their only career occupation. General insurance products are sold through
individual agents, corporate agents and brokers. Distribution channels such as agents are
licensed by the IRDA. To get an agency license, one has to have certain minimum
qualifications; practical training in insurance subjects and pass an examination conducted by
the Insurance Institute of India. IRDA regulations on licensing of agents/brokers lay down
the code of conduct for individual agents, corporate agents and brokers. A separate note on
the code of conduct is appended to this note.

Thus, it is seen that the dos and don’ts for these intermediaries are given clearly at the point
of sale as well as in the event of a claim. Service does not end with the customer receiving
his document; it in fact only begins here. After sales service is as important or even more
important– like when a refund has to be made or when a claim has to be made. One of the
issues that is of great concern affecting professionalism in insurance activities is resorting
rebating by intermediaries. Rebating is prohibited as per Section 41 of the Insurance Act,
1938 and the public are advised not to deal with
intermediaries offering rebate of any kind.

Rebating means a share of commission receivable by the agent/broker is given to the

prospect/client. This is done to attract the client in the purchase of insurance contract by
offering cash. Competition among agents/brokers is so cut-throat, some agents indulge in
such unethical practices. Public are advised not to ask for any prohibited rebates in premium
since commission payment to an agent is the only income for some to take care of their
families. Similarly, agents are also advised not to indulge in such practices which could
cause them loss of agency income.

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Conclusion

An Insurance policy is an investment-oriented plan. As compared to other investment

plans, the investment portfolio of the Insurance Policy functions like a mutual fund and
other investment. It is invested in a portfolio of debt and equity instruments, in conformity
with the announced investment policy. Hence it grows or erodes in line with the
performance
of that portfolio. From this study it reveals that the consumer’s attitude towards Insurance
Policy and Insurance Company changed a lot. A 5 years before the consumers and the
general public we’re not interested to take an Insurance Policy but now days there are many
options and choices in front of the customers. They are interested to take high return policies
in order to secure their lives. People are aware of all the benefits and returns of insurance
policies. As a result of this new international and domestic companies are coming to the
Indian Market.

Since there are many players in the Indian Insurance Market the competition level is very
high. So the companies are introducing new schemes. From this it is found that The LIC
is the major market share holder in the insurance field. Even if there are many players in
this field still it is an untapped market. Only a few portions of Indian population is insured.
Insurance is considered as one of the important segments of the economy for its growth and
development. This industry provides long term funds which are essential for the
growth and development of the nation .so the growth of insurance industry largely depends
up on the environment in which they exist. Here I would like to mention about
Indian business environment and their impact on insurance sector. There are two type of
environment which affect the business one is environment which is internal to the
organization (internal environment) and the other one which is external to the
organization (external environment). Internal environment includes management,
technology, competitors, employees, shareholders, policyholders, marketing intermediary
The external environment of insurance business has been classified in four parts,
namely legal, economic, financial, and commercial. let us discus them in detail by taking
one by one.

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References
 https://bizfluent.com/facts-6905261-insurance-product-definition.html
 https://www.fieldfisher.com/expertise/financial-services/insurance-companies-and-
their-products
 http://www.policyholder.gov.in/Available_Products.aspx

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