Indian Insurance Industry: an Industry Competitive Analysis

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Indian Insurance Industry: An Industry Competitive Analysis


Anubha Shekhar Sinha (

1.0Introduction and Evolution of Indian General Insurance Industry

Insurance is the backbone of a country’s risk management system. The Insurance providers offer a variety of products to businesses and individuals in order to provide protection from risk and to ensure financial security. They are important component of financial intermediation chain of a country and are a source of long-term project capital. Their participation in financial markets evens out fluctuations. Mitigation of risk and its impact helps organization and individuals to become entrepreneurs and has a positive effect on growth. The benefit of insurance as a financial intermediary is thus to provide liquidity in the market by reducing the cost of capital through mitigating risk. Thus, a strong Insurance culture of a country can be said to be an indicator of its development and growth potential. The Insurance Business is broadly divided into life, health and non-life insurance.

Indian Insurance can be said to have undergone three phases of its evolution viz. Pre Nationalization, Nationalization and Privatization era. Triton Insurance Company Ltd promoted by British was the first general insurance company in Calcutta in 1850. Non-life insurance was finally regulated in 1938 through the passing of the Insurance Act, which continues till date to be the definitive piece of legislation on insurance and controls both life insurance and general insurance. The general insurance business was nationalized with effect from January 1, 1973, through the introduction of the General Insurance Business Act, 1972. Prior to 1973, there were 107 companies, including foreign companies, offering general insurance in India. These companies were amalgamated and grouped into four subsidiary companies of GIC (1) National Insurance Company Limited, (2) The New India Assurance Company Limited, (3) The Oriental Insurance Company Limited, and (4) United India Insurance Company Limited The bulk of the general insurance business of fire, marine, motor and miscellaneous insurance business are still under taken by the four subsidiaries. The Indian Parliament passed the Insurance Regulatory and Development Act (IRDA), in 1999, which permitted establishing of private insurers with limited FDI stake. These insurers can operate in purview of IRDA the regulator. Many private companies have emerged after 1999 in non-life insurance. New companies are mostly joint venture of Indian corporate/financial service giants with leading insurance companies around the world. Indian economy grew at rate of 8.19% for the quarter ended June 30, 2006. The Life Insurance industry witnessed an inflow of Rs 137.36 Bn for the period upto the first quarter of Year 06-07, a growth of 209.56%. The No. of Policies sold grew by 35.92% to 5.27mn. The average premium collected per policy grew at 127.76% from Rs.11431 to Rs26036. This increase signifies increase in risk appetite of the insurance players as well as increased consumer spending on insurance coverage benefits. Penetration of insurance critically depends upon the availability of insurance products and services.

2.0Industry Competitiveness

Forces, which shape the competitiveness of the Insurance Industry, are as follows- • Huge untapped market
• Proliferation of schemes
• New product innovations
• Perception of insurable risks of Indian consumers
• Competitive Pressure arising from integration of Banks and Insurance • Impact of Information Technology
• How service oriented insurers are going to be
• Role of Insurance Industry in Financial Services Industry

Some of the Drivers of increasing Industry demands altogether are as follows-

• Rise in Income levels
• Growth of Infrastructure projects and need for cover • Growth of International Trade
• Regulations and...
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