Life Insurance: An Overview of Available Policies in India

Generally speaking there are two types of insurance policies available in India. Investment cum insurance plans and coverage of pure life (called term life insurance).

Investment cum insurance plans (which serve the dual purpose of life cover and savings) are subdivided in traditional insurance plans and ULIPs. The main difference between the two is that whereas in the case of traditional insurance plans, investment risk is borne by the insurer, by ULIPs which is borne by the insured.

The two also differ in other factors such as the maximum equity exposure, flexibility, transparency and liquidity.

Now, traditional insurance plans offered by life insurance companies in India are basically three types:

1.Whole Life Plans

2.Endowment plans

3.Money back plans

Whole life policy provides life insurance coverage for life. It is a kind of permanent insurance and provides for payment of sum assured along with bonuses nominees in the death of the policyholder. However, whole life plans typically provide coverage only up to the maximum age of 80-85.

As in the plans of life, political life-insurance provision used to be more popular before the introduction of ULIPs- also provide a combination of insurance and savings. However, unlike the plans of life, endowment plans provide life insurance coverage for a specific period.

Money back plans are also quite similar to endowment plans; The only major difference between the two is that while staffing plans pay the total sum only after maturity (survival), plans Refund allows regular payments of predetermined amounts at predetermined periods.

The traditional plans declared bonus depends on return on investment and is not guaranteed. It is of two types: non-reversing and reversing. If the bond accumulates and is paid at the time of maturity or death is called bonus reversal. And if allowed to be collected, it is called bonus no reversal.

Another distinction between different life insurance policies is based on premium payments. There are plans for single premium and regular premium plans.

In contrast to regular premium policies, single premium plans (where premium has to be paid once) are considered more of an investment product, as they tend to offer less insurance coverage and have relatively short tenure compared with plans for regular premiums.

Moreover, under the IT Act tax benefits available in the insurance gets curtailed for an insurance plan that is insured amount less than 5 times the premium paid. In other words, if the premium paid is more than 20% of the sum insured under the life insurance policy, then the tax benefit under section 80C is limited to 20% of the sum insured. For example, to make use of the maximum tax benefit on a life insurance policy with a sum assured of Rs 1 lakh, the premium paid can not exceed 20,000 rupees.

In such cases the tax exemption available under section 10 (10D) Law on Income Tax 1961, the income received in survival achieved maturity also lost.

Finally, long-term plans are purest form of life insurance that provides maximum protection at minimum cost. In other words, long-term plans will provide high coverage low premium. However, the flip side is that you do not get anything in return at the expiration of the term (ie, there is no maturity value).

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Indian Insurance Sector: Challenges & Future

ORIGIN:

Insurance has a long history in India. Life insurance in its present form was introduced in 1818 when Oriental Life Insurance Company started its operations in India. However, a relatively late entrant Seguros Generales was in 1850 when Triton Insurance Company established its base in Kolkata.

History of Insurance in India can be broadly bifurcated into three periods: a) Pre Nationalization b) Nationalization c) Nationalization Post. Life insurance was the first to be nationalized in 1956. Life Insurance Corporation of India was formed by consolidating operations from several insurance companies. General insurance did the same and was nationalized in 1973. General Insurance Corporation of India was established as the controlling body with New India, United India and Oriental National and its subsidiaries.

The process of opening the insurance sector in the context of the economic reform process that began in 1991. To this end Malhotra committee was formed this year which submitted its report in 1994 and the Insurance Regulatory Development Act started (IRDA) was approved in 1999. Indian Insurance resultantly opened to private companies and Private Insurance Company effectively started operations since 2001.

Insurance Market- Present:

The insurance sector was opened to private participation, eight years ago. For years, private actors are active in the deregulated environment. The insurance market has witnessed dynamic changes including the presence of a large number of insurers both life and non-life segment. Most private insurance companies have formed joint venture partner renowned foreign players worldwide.

At present there are 29 insurance companies operating in the Indian market - 14 private life insurers, nine insurance companies do not privacy-six public sector companies. With many more sets companies at the hearing, the insurance industry in India today is at a crossroads as competition intensifies and companies to develop strategies for survival in a detariffed scenario.

There is pressure from both within the country and outside the government to increase the limit of foreign direct investment (FDI) from the current 26% to 49%, which would help to attract JV partners funds for expansion.

There are opportunities in the field of pension regulations are being framed. Less than 10% of older Indians 60 receive pensions. The IRDA has issued the first license to a company independent health in the country and that many more players wait to enter. The sector of health insurance has a huge growth potential, and as it matures and new players enter, product innovation and improvement will increase. The deepening of the database health over time will also allow players to develop and price products for broader segments of society.

State insurers still dominate: There may be room for many more players in a large underinsured market like India, with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and therefore failing to make an impact on the market.

Also as the private sector controls more than 26.18% of the life insurance market and more than 26.53% of the non-life market, companies in the public sector remains the last word.

Largest life insurer in the country, Life Insurance Corporation of India (LIC), had a 74.82% stake in the new business premium income in November 2005.

Similarly, the four public sector non-life insurers - New India Assurance, Social Security, Oriental Insurance and United India Insurance - had a combined market share of 73.47% from October 2005. ICICI Prudential Life Insurance Company continues to lead the private sector with a market share of 7.26% in terms of fresh raw, while ICICI Lombard General Insurance Company is the leader among the players no privacy with a market share of 8.11%. ICICI Lombard has focused on the growth of the market for general insurance products and increasing penetration of existing customers through innovation and product distribution.

Reach customers: No doubt, the profile of customers in the insurance industry is changing with the introduction of a large number of divergent intermediaries such as brokers, corporate agents, and banc assurance.

The industry now deals with customers who know what they want and when, and are more demanding in terms of better service and quick responses. With the industry all set to move to a system of tariffed by 2007, there will be a considerable improvement in the levels of customer service, product innovation and new underwriting standards.

Intense competition: In an environment of tariffs, competition is manifest in the prices, products, underwriting criteria, innovative sales methods and solvency. Insurance companies compete with each other to capture market share through better pricing and customer segmentation.

The battle has been waged so far in large urban cities, but in the coming years, increasing competition push insurers to rural and semi-urban markets.

Global Standards: While the world is eyeing India for growth and expansion, Indian companies are becoming increasingly global class. Take the case of SCI, which has set its sights on becoming a major global player after investing Rs280 crore from the Indian government. The company now operates in Mauritius, Fiji, UK, Sri Lanka and Nepal and will soon start operations in Saudi Arabia. It also plans to venture into the African and Asia-Pacific in 2006.

2005 was a testing phase for the general insurance industry with a series of catastrophes that hit the Indian subcontinent. However, with robust reinsurance programs in place; insurers have succeeded to overcome the crisis without any negative impact on their balance sheets.

With life insurance premiums to be only 2.5% of GDP and general insurance premiums being 0.65% of GDP, opportunities in the Indian market is immense.

The future of the insurance sector will be difficult, but you can build the scale and market share will survive and prosper

From the above, it is important to mention here that the scope of the insurance businesstoday absolutely depends on the role played by the best agents nemely MDRT Members club president, development and dynamiic able officersin sector life insurance.

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Indian Life Insurance Industries- Future Perspective

Life insurance is one of the sectors with good growth potential. It is the only financial asset that provides performance, and the hedging of life. In the modern era term assurance it is less important because it only provides risk coverage without return. Investors in life insurance are both looking good profitability and hedging of life. Hence the new policies framed by the companies will both elements. After the privatization of life insurance sectors in 2000, there were drastic changes in the sector.

Linked policies were framed instead of conventional policies. Investors are looking for earnings of equity markets as well. These investors can invest in mutual funds, but does not cover the risk of life. The potential for growth and spread of life insurance in India is high due to the large population and no pension system between groups of larger work that leads to no old age income. The insurance sector provides the long-term contractual savings for investors.

In the life insurance business, India ranks ninth among 156 countries. During 2010-11, the estimated insurance premium life in India grew by 4.2 percent (adjusted for inflation). However, during the same period, the insurance premium global life expanded 3.2 percent. The share of life insurance in India industry in the global market was 2.69 percent in 2010, compared to 2.45 percent in 2009. In this paper we analyze the past and present state of the insurance sector India in general and life insurance in particular. It also discusses the future of the Indian insurance sector.

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