General Insurance

General Insurance Market in India and

The Emerging Scenario.

The general insurance market in India is growing at a very fast pace. The annual growth is more than 20%. This has happened due economic liberalization and due to the entry of private players in the field of insurance in 2001 and afterwards. The 12 non-life players collected Rs.25, 002.00 Crores during the year 2006-07 whereas the figures of last year were Rs.20, 431.00 Crores. That way it is a growth of about 19%. This figure of 2006-07 is 125 times of the figure of business procured in 1973, which was Rs. 200.00 Crores. It was the year 1973 when the Government of India nationalized the general insurance business.

The exact percentage of growth and future potential in this sector can be judged or measured from this fact that today an average Indian spends only Rs.100 for getting the coverage of insurance for non-life products, which includes the health products. If we compare this figure we shall find that this figure is more than Rs.700 in East Asian countries and mind boggling Rs.50, 000 in Japan and Rs.100, 000 ($2500) in US.

Taking in to account the business figures circulated by IRDA we find that the general insurance business figures of last year was Rs.25000 Crores. In other words every day Rs 70 Crores non-life insurance business is being done in India and that way every month Rs. 2100 Crores change hands. This is really a very huge amount and we can safely visualize that by 2015 the business will cross the Rs.100, 000 Crores figures.

The private players in non-life sector are holding a market share of around 35% whereas the public sector companies are having only 65% share of the business in the country. The public sector companies business although increasing year by year but the market ratio is decreasing every year.

If the business figures of August 2007 are the indications then the above share percentage of the market pai may make drastic changes. During the last month the ICICI Lombard transacted a business of Rs. 301 Crores whereas the United India transacted the business of Rs.293 Crores and the Oriental insurance Co did a business of Rs.288 Crores and the National Insurance Company had a business of Rs.295 Crores. Thus the only company, which is the forerunner in this very tight competition, is the New India Assurance co with a business figure of Rs.350 Crores.

In this month (August 2007) the private players did a business of Rs.881.00 Crores and the Public sectors companies did a business of Rs.1227.00 Crores totaling Rs.2108 Crores, thus making it a 40:60 ratio.

HISTORICAL PRESPECTIVE:

As in life insurance, there were more than 100 non-life insurance players in India operating till 1971. There were a lot of complaints against these private players regarding mismanagement of funds and non-performance of their part of contracts, with the result that the business of non-life insurers was nationalized by the government of India and one insurer named as General Insurance Corporation of India (GIC of India) came in to being. This corporation started its business in India by taking over the reins of all the private players. The GIC of India worked through its four subsidiaries named as:

1. National Insurance co.

2. Oriental insurance co.

3. New India insurance company. And

4. United India insurance co.

With the passing of IRDA Act in 1999 under which the private players were allowed entry in the field of insurance sector these four subsidiaries of GIC of India, which were till now working under GIC of India were made autonomous companies enabling them to transact the non-life business. The GIC of India was upgraded as Re-Insurance Company, the only reinsurer in India so for. These four companies are now licensed as non-life insurers independently.

LEGAL POSITION:

With the coming of IRDA the provisions have been made and necessary amendments have been effected in the Life Insurance Corporation of India Act, 1956 to enable any insurance company to transact the life or non life insurance business. The foreign insurers were allowed entry but with a maximum of 26% equity. The minimum of 76% share has to be of the Indian company. No insurance company could transact both life and non-life business. That way composite business was not allowed.

THE EMERGING SCENARIO:

These four subsidiaries of GIC of India were the only insurance companies till the coming of private players in 2001 to transact the non-life insurance business in India. Now there are 13 other insurers in the field. Till last year these four public sector insurers were holding the top 4 positions in procuring the non-life insurance business. This year ICICI Lombard has shifted to the top of the all the private players and has ranked as 5th overall.

The growth rate of this industry is more than 20% annually with the result Rs.100, 000.00 Crores target is not for of and it is hoped that the industry will touch it by 2015 or rather earlier. The potential of the insurance business of this sector is clear from the fact that we have been able to tap a business of less than 3%. That means there is vast untapped potential that can be exploited.

REASONS:

This immense growth that we are seeing in general insurance business has been possible due to the following factors:

1. Rapid Industrialization of the country. With the economic liberalization the industrialization in the country has stepped up and this rapid industrialization has made it possible that the non-life insurance business is also growing with a fast pace. Risk management demands that industry should run hazard free and the Insurance is such a tool of sharing the losses. So it is the need of the industry.

2. Population Expansion through out the country. With the population expansion the need for insurance has come up due to hazards involved to the breadwinners of the family. The health products are more in demand due to displacement of the people.

3. Greater Disposable Income of the people. The per capita income is increasing and the people have sufficient funds to set aside for the purpose of taking up the coverage of their belongings.

4. More personal assets. When the income increases the buying capacity also increases. Naturally when the people will have more personal