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The word "Fear" has only four alphabets like love but both of them have very dissimilar e meaning. Anything man (malor female) does for the love of their families always starts with the background of fear. Generally so many times we have been request our selves that, what will happen if we were not there, but we keep on request rather then doing something for it. Time is precious, it never stops for any one and we are living in the world of uncertainty; the uncertainty of job, the uncertainty of money, the uncertainty of property and like this the story goes continuous for the whole life of a man.
A prosperous guarnatee sector is of vital importance to every contemporary economy. Firstly because it encourages the habit of saving, secondly because it provides a security net to rural and urban enterprises and effective individuals. And perhaps most importantly it generates long- term imperceptible funds for infrastructure building. The nature of the guarnatee enterprise is such that the cash inflow of guarnatee clubs is constant while the payout is deferred and contingency related.
This characteristic highlight of their enterprise makes guarnatee clubs the biggest investors in long-gestation infrastructure amelioration projects in all advanced and aspiring nations. This is the most compelling presuppose why inexpressive sector (and foreign) companies, which will spread the guarnatee habit in the societal and consumer interest are urgently required in this vital sector of the economy. Chance up of guarnatee to inexpressive sector along with foreign participation has resulted into various opportunities and challenges in India.
Life guarnatee Market
The Life guarnatee shop in India is an underdeveloped shop that was only tapped by the state owned Lic till the entry of inexpressive insurers. The penetration of life guarnatee products was 19 percent of the total 400 million of the insurable population. The state owned Lic sold guarnatee as a tax instrument, not as a goods giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the inexpressive insurers the rules of the game have changed.
The 12 inexpressive insurers in the life guarnatee shop have already grabbed nearly 9 percent of the shop in terms of premium income. The new enterprise premium of the 12 inexpressive players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, with regard to state owned Lic's new premium enterprise has fallen.
Innovative products, smart marketing and aggressive distribution. That's the triple whammy combination that has enabled fledgling inexpressive guarnatee clubs to sign up Indian customers faster than Anything ever expected. Indians, who have always seen life guarnatee as a tax rescue device, are now suddenly turning to the inexpressive sector and snapping up the new innovative products on offer.
The growing popularity of the inexpressive insurers is evidenced in other ways. They are coining money in new niches that they have introduced. The state owned clubs still dominate segments like endowments and money back policies. But in the annuity or pension products business, the inexpressive insurers have already wrested over 33 percent of the market. And in the popular unit-linked guarnatee schemes they have a virtual monopoly, with over 90 percent of the customers.
The inexpressive insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. For instance, the mean size of a life guarnatee policy before privatization was nearby Rs 50,000. That has risen to about Rs 80,000. But the inexpressive insurers are ahead in this game and the mean size of their policies is nearby Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the manufactures average.
Buoyed by their quicker than improbable success, nearly all inexpressive insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of inexpressive insurers is already paying rich dividends. But a rejuvenated Lic is also trying to fight back to woo new customers.
Insurance Today
In 1993, Malhotra Committee, headed by previous Finance Secretary and Rbi Governor R. N. Malhotra, was formed to value the Indian guarnatee manufactures and propose its hereafter direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.
With the setup of guarnatee Regulatory amelioration Authority (Irda) the reforms started in the guarnatee sector. It has became important as if we collate our guarnatee penetration and per capita premium we are much behind then the rest of the world. The table above gives the statistics for the year 2000.
With the improbable growth in per capita income to 6% for the next 10 year and with the correction in the awareness levels the question for guarnatee is improbable to grow.
As per an independent consultancy company, Monitor Group has estimated a growth form Rs. 218 Billion to Rs. 1003 Billion by 2008. The estimations seems achievable as the operation of 13 life guarnatee players in India for the year 2002-2003 (up to October, based on the first year premium) is Rs. 66.683 million being Lic the biggest contributor with Rs. 59,187 million. As of now Lic has 2050 branches in 7 zones with strong team of 5,60,000 agents.
Impact Of Globalisation
While nationalized guarnatee clubs have done a commendable job in extending the volume of the business, Chance up guarnatee sector to inexpressive players was a necessity in the context of globalization of financial sector. If former infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc., have important inexpressive sector presence, lasting a state of monopoly in provision of guarnatee was indefensible and therefore, the globalization of guarnatee has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges.
The introduction of inexpressive players in the manufactures has added colours to the dull industry. The initiatives taken by the inexpressive players are very competing and have given heavy competition to the on time monopoly of the shop Lic. Since the advent of the inexpressive players in the shop the manufactures has seen new and innovative steps taken by the players in the sector. The new players have improved the service quality of the insurance. As a result Lic down the years have seen the declining in its career. The shop share was distributed among the inexpressive players. Though Lic still holds 75% of the guarnatee sector the upcoming nature of these inexpressive players are enough to give more competition to Lic in the near future. Lic shop share has decreased from 95%(2002-03) to 81% (2004-05). The following enterprise holds the rest of the shop share of the guarnatee industry.
Table - 1
Impact Of Globalisation
Name Of The Player shop Share (%)
Lic 82.3
Icici Prudential 5.63
Birla Sun Life 2.56
Baja Allianz 2.03
Sbi Life 1.80
Hdfc Standard 1.36
Tata Aig 1.29
Max New York 0.90
Aviva 0.79
Om Kotak Mahindra 0.51
Ing Vyasa 0.37
Amp Sanmar 0.26
Metlife 0.21
Present Scenario Of Globalisation
In a tough battle to develop shop shares the inexpressive sector life guarnatee manufactures consisting of 14 life guarnatee clubs at 26% have lost 3% of shop share to the state owned Life guarnatee Corporation(Lic) in the domestic life guarnatee manufactures in 2006-07. According to the figures released by guarnatee Regulatory & amelioration Authority, the total premium of these 14 clubs have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.
Lic with a total premium mobilisation of Rs 55,934 crore has been able to preserve a shop share of 74.26 % during the reporting period. In total the life guarnatee manufactures in first year premium has grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 operation has thrown a few surprises in the ranking among the inexpressive sector life guarnatee companies. New entrants like reliance Life and Sbi Life had shown a huge growth of over 381% and 210% respectively during the year. reliance Life which has become one of the top five clubs ended the year with a premium of Rs 930 crore during the year.
Though Icici Prudential Life guarnatee remained as the No 1 inexpressive sector life guarnatee enterprise during the year. Bajaj Allianz overtook Icici Prudential in terms of monthly shop share in March, for the first time ever. Bajaj's shop share among inexpressive players in non-single premium for March stood at 29.1% vs. Icici Prudential's 23.8%. Bajaj gained 4.6 division point shop share among inexpressive sector players for Fy07.
Among other inexpressive players, Sbi Life and reliance Life continued to do well, each gaining 4% shop share in Fy07. Sbi Life's growth was driven by expanding gift from Ulip premiums. Other famed developments of the 2006-07 operation has been the expansion of retail markets by the life guarnatee comapnies. Bajaj Alliannz Life guarnatee has added 20 lakh policies while Icici Prudential has extensive over 19 lakh policies during the year.
With the largest amount of life guarnatee policies in force in the world, guarnatee happens to be a mega Chance in India. It's a enterprise growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the country's Gdp. Gross premium range is nearly 2 per cent of Gdp and funds available with Lic for investments are 8 per cent of Gdp.
Yet, nearly 80 per cent of Indian people is without life guarnatee cover while health guarnatee and non-life guarnatee continues to be below international standards. And this part of the people is also subject to weak group security and pension systems with hardly any old age income security. This itself is an indicator that growth inherent for the guarnatee sector is immense.
A well-developed and evolved guarnatee sector is needed for economic amelioration as it provides long term funds for infrastructure amelioration and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would want investments of the order of one trillion Us dollar. The guarnatee sector, to some extent, can enable investments in infrastructure amelioration to preserve economic growth of the country.
Insurance is a federal subject in India. There are two legislations that govern the sector- The guarnatee Act- 1938 and the Irda Act- 1999. The guarnatee sector in India has become a full circle from being an open competing shop to nationalisation and back to a liberalised shop again. Tracing the developments in the Indian guarnatee sector reveals the 360 degree turn witnessed over a period of approximately two centuries.
Important milestones in the life guarnatee enterprise in India
1912: The Indian Life guarnatee clubs Act enacted as the first statute to regulate the life guarnatee business.
1928: The Indian guarnatee clubs Act enacted to enable the government to get statistical data about both life and non-life guarnatee businesses.
1938: Earlier legislation consolidated and amended to by the guarnatee Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. Lic formed by an Act of Parliament- Lic Act 1956- with a capital gift of Rs. 5 crore from the Government of India.
In a tough battle to develop shop shares the inexpressive sector life guarnatee manufactures consisting 14 life guarnatee clubs at 26% have lost 3% of shop share to the state owned Life guarnatee Corporation(Lic) in the domestic life guarnatee manufactures in 2006-07. According to the figures released by guarnatee Regulatory & amelioration Authority the total premium these 14 clubs have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.
Lic with a total premium mobilisation of Rs 55,934 crore has been able preserve a shop share of 74.26 % during the reporting period. In total the life guarnatee manufactures in first year premium has grown by 110% to Rs 75, 406 crore during 2006-07. The 2006-07 operation has thrown a few surprises in the ranking among the inexpressive sector life guarnatee companies. New entrants like reliance Life and Sbi Life had shown a huge growth of over 381% and 210% respectively during the year. reliance Life which has become one of the top five clubs ended the year with a premium of Rs 930 crore during the year.
Though Icici Prudential Life guarnatee remained as the No 1 inexpressive sector life guarnatee enterprise during the year Bajaj Allianz overtook Icici Prudential in terms of monthly shop share in March, for the first time ever. Bajaj's shop share among inexpressive players in non-single premium for March stood at 29.1% vs. Icici Prudential's 23.8%. Bajaj gained 4.6 division point shop share among inexpressive sector players for Fy07.
Among other inexpressive players, Sbi Life and reliance Life continued to do well, each gaining 4% shop share in Fy07. Sbi Life's growth was driven by expanding gift from Ulip premiums. Other famed amelioration of the 2006-07 operation has been the expansion of retail markets by the life guarnatee companies. Bajaj Alliannz Life guarnatee has added 20 lakh policies while Icici Prudential has extensive over 19 lakh policies during the year.
Opportunites
- A state monopoly has itsybitsy incentive to innovative or offers a wide range of products. It can be seen by a lack of safe bet products from Lic's briefcase and lack of uncut risk categorization in some Gic products such as health insurance. More competition in this enterprise will spur firms to offer some new products and more complex and uncut risk categorization.
- It would also result in better customer services and help heighten the range and price of guarnatee products.
- The entry of new players would speed up the spread of both life and general insurance. Spread of guarnatee will be measured in terms of guarnatee penetration and portion of density.
- With the entry of inexpressive players, it is improbable that guarnatee enterprise approximately 400 billion rupees per year now, more than 20 per cent per year even leaving aside the relatively under advanced sectors of health insurance, pen More importantly, it will also ensure a great mobalisation of funds that can be utilized for purpose of infrastructure amelioration that was a factor considered for globalisation of insurance.
- More importantly, it will also ensure a great moblisation of funds that can be utilized for purpose of infrastructure amelioration that was a factor considered for globalisation of insurance.
- With allowing of retention of equity shares by foreign enterprise either itself or through its subsidiary enterprise or nominee not exceeding 26% of paid up capital of Indian partners will be operated resulting into supplementing domestic savings and expanding economic develop of nation. Agreements of various ventures have already been made to be discussed later on in this paper.
- It has been estimated that guarnatee sector growth more than 3 times the growth of cheaper in India. So enterprise or domestic firms will endeavor to invest in guarnatee sector. Moreover, growth of guarnatee enterprise in India is 13 times the growth guarnatee in advanced countries. So it is natural, that foreign clubs would be fostering a very strong desire to invest something in Indian guarnatee business.
- Most prominent not the least vast employment opportunities will be created in the field of guarnatee which is burning problem of the gift day today issues.
Challenges Before The Industry
New age clubs have started their enterprise as discussed earlier. Some of these clubs have been able to float 3 or 4 products only and some have targeted to accomplish the level of 8 or 10 products. At present, these clubs are not in a position to pose any challenge to Lic and all other four clubs operating in general guarnatee sector, but if we see the quality and standards of the products which they issued, they can absolutely be a challenge in future. Because the challenge in the whole environment caused by globalisation and liberalization the manufactures is facing the following challenges.
- The existing insurer, Lic and Gic, have created a large group of dissatisfied customers due to the poor quality of service. Hence there will be shift of large amount of customers from Lic and Gic to the inexpressive insurers.
- Lic may face problem of surrender of a large amount of policies, as new insurers will woo them by offer of innovative products at lower prices.
- The corporate clients under group schemes and wage savings schemes may shift their loyalty from Lic to the inexpressive insurers.
- There is a likelihood of exit of young dynamic managers from Lic to the inexpressive insurer, as they will get higher box of remuneration.
- Lic has overstaffing and with the introduction of full computerization, a large amount of the employees will be surplus. Any way they cannot be retrenched. Hence the operating costs of Lic will not be reduced. This will be a disadvantage in the competing market, as the new insurers will control with lean office and high technology to sell out the operating costs.
- Gic and its four subsidiary clubs are going to face more challenges, because their administration expenses are very high due to surplus staff. They can't sell out their amount due to service rules.
- Management of claims will put strain on the financial resources, Gic and its subsidiaries since it is not up the mark.
- Lic has more than to 60 products and Glc has more than 180 products in their kitty, which are outdated in the gift context as they are not convenient to the changing needs of the customers. Not only that they are not competent enough to perfect with the new products offered by foreign clubs in the market.
- Reaching the consumer expectations on par with foreign clubs such as better yield and much improved quality of service particularly in the area of hamlet of claims, issue of new policies, transfer of the policies and revival of policies in the liberalized shop is very difficult to Lic and Gic.
- Intense competition from new insurers in winning the consumers by multi-distribution channels, which will include agents, brokers, corporate intermediaries, bank branches, affinity groups and direct marketing through telesales and interest.
- The shop very soon will be flooded by a large amount of products by fairly large amount of insurers operating in the Indian market. Even with itsybitsy range of products offered by Lic and Gic, the consumers are confused in the market. Their blurring will further growth in the face for large amount of products in the market. The existing level of awareness of the consumers for guarnatee products is very low. It is so because only 62% of the Indian people is literate and less than 10% educated. Even the educated consumers are ignorant about the various products of the insurance.
- The insurers will have to face an acute problem of the redressal of the consumers, grievances for scantness in products and services.
- Increasing awareness will bring amount of legal cases filled by the consumers against insurers is likely to growth substantially in future.
- Major challenges in canalizing the growth of guarnatee sector are goods innovation, distribution network, speculation management, customer service and education.
Essentials To Meet The Challenges
- Indian guarnatee manufactures needs the following to meet the global challenges
- Understanding the customer better will enable guarnatee clubs to manufacture appropriate products, decide price correctly and growth profitability.
- Selection of right type of distribution channel mix along with thrifty and effective Fos [Fleet On Street] management.
- An effective Crm system, which would finally originate sustainable competing advantages and build a long-lasting relationship
- Insurers must result best speculation practices and must have a strong asset administration enterprise to maximize returns.
- Insurers should growth the customer base in semi urban and rural areas, which offer a huge potential.
- Promoting health guarnatee and using e-broking to growth the business.
Conclusion
Thus, in the last on basis of above the argument we can conclude that need for inexpressive sector entry is justifiable on the basis of improving the efficiency of operation, achieving greater density and guarnatee coverage in the country and for greater mobilization of long-term savings for long gestation infrastructure projects. In the wake of such competition it is important for the government monopolies (Lic and Gic) that they swiftly up grade their technology, restructure themselves on more effective lines and control as broad run enterprise. New players should not be treated as rivalries to government companies, but they can supplement in achieving the objective of growth of guarnatee enterprise in India.
* Lecturer, branch of Commerce, Bharathiar University, Coimbatore-46
Email - buarticlecommerce@yahoo.com
** Ph.D Scholar, branch of Commerce, Bharathiar University, Coimbatore. Email - parentbala@sify.com
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