Life Insurance Companies In India Commerce Essay

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About Insurance Industry. Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the Insurance Companies act as trustees to the amount collected. For Example, in a Life Policy, by paying a premium to the Insurer, the family of the insured person receives a fixed compensation on the death of the insured. Similarly, in car insurance, in the event of the car meeting with an accident, the insured receives the compensation to the extent of damage. It is a system by which the losses suffered by a few are spread over many, exposed to similar risks.

Logic of insurance

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It is a system by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the amount premiums collected from the insuring public and the Insurance Companies act as trustees to the collected.

Need of insurance

Insurance is desired to safeguard oneself and one's family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. By taking life insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death. Certain Insurance contracts are also made compulsory by legislation. For example, Motor Vehicles Act 1988, stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering "Act" risks. Another example of compulsory insurance pertains the Environmental Protection Act, wherein a person using or to carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy.

Insurance in India

Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government.

History of Insurance in India

Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates.

At the dawn of the twentieth century, insurance companies started mushrooming up. 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 disparage still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is National Insurance Company Ltd, which was founded in 1906 and is doing business even today. The Insurance industry earlier consisted of only two state insurers: Life Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General Insurance Corporation of India (GIC). GIC had four subsidiary companies.

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With effect from December 2000, these subsidiaries have been de-linked from parent company and made as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was enacted in the same year to, inter-alia, form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006.

Different Insurance Companies

Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance industry, in this year the life insurance industry was liberalized after more than fifty years. Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are fifteen private life insurance companies has entered the industry. After the entry of these private players, the market share of LIC has been considerably reduced. In the last five years the private players is able to expand the market (growing at 30% per annum) and also has improved their market share to 18%.For the past five years private players have launched many innovations in the industry in terms of products, market channels and advertisement of products, agent training and customer services etc.

The various life insurers entered India:-

1. Bajaj Allianz Life Insurance Company Limited

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd.

5. ING Vysya Life Insurance Company Ltd.

6. Max New York Life Insurance Co. Ltd

7. Met Life India Insurance Company Ltd.

8. Kotak Mahindra Old Mutual Life Insurance Limited

9. SBI Life Insurance Co. Ltd

10. Tata AIG Life Insurance Company Limited

11. Reliance Life Insurance Company Limited.

12. Aviva Life Insurance Co. India Pvt. Ltd.

13. Sahara India Life Insurance Co, Ltd.

India: The Next Insurance Giant

Market Performance & Forecast: In 2000, Indian insurance market size was $21.71 billion. Between 2000 and 2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and 2007, total premiums maintained an average growth rate of 11.96% and the CAGR growth during this time frame has been 11.96%. It was one of the most consistent growth patterns we have noticed in any other emerging economies in Asian as well as Global markets.

Comparative analysis of life insurance companies in India on the basis of products

INTRODUCTION TO THE COMPANIES:-

Birla Sun Life Insurance

Birla sun life Insurance Company limited is a joint venture between the Aditya Birla group, one of the largest business houses in India and Sun Life Financial Inc., as leading international financial services organization. The local knowledge of the Aditya Birla group combined with the expertise of Sun Life Financial Inc., offer a formidable protection for your future. The Aditya Birla group has a turnover of Rs. 1,33,875 corers (as on 31st march 2008). It has over 100,000 employees across all its units worldwide. It is led by its chairman - Mr. Kumar Mangalam Birla. Some of its key companies are Hindalco, Grasim and Aditya Birla Nuvo.

Sun Life Financial Inc. and its partners, have operations in key markets worldwide. These include Canada, U.S, U.K, Hong Kong, the Philippines, Japan, Indonesia, India, china and Bermuda. Sun Life Financial Inc. has assets under management of over us$ 404.7 BILLION (as on 31st March, 2008). It is a leading performer in the life insurance market in Canada.

Birla sun life insurance (BSLI) has been operating for 7 years. It has contributed significantly to the growth and development of the life insurance industry in India. It pioneered the launch of unit linked life insurance plans amongst the private player in India. It pioneered the launch of united linked life insurance plans amongst the private players in India. It was the first player in industry to sell its policies through the Bancassurance route and through the internet. It was the first private sector player to introduce a pure term plan in the Indian market. BSLI has covered more than 2 million lives since it commenced operations.

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Life Insurance Corporation Of India

Mission

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"Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."

Vision

"A trans-nationally competitive financial conglomerate of significance to societies and Pride of India

Every day we wake up to the fact that more than 220 million lives are part of our family called LIC. We are humbled by the magnitude of the responsibility we carry and realize that the lives that are associated with us are very valuable indeed.

Although this journey started five decades ago, we are still conscious of the fact that, while insurance may be a business for us, being part of millions of lives every day for the past 52 years has been a process called TRUST.

Tata AIG life-A New Look at Life

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by the Tata Group and American International Group, Inc. The Tata Group holds 74 percent stake in the insurance venture with AIG holding the balance 26 percent. Tata AIG Life provides insurance solutions to individuals and corporate. Tata AIG Life Insurance Company was licensed t operates in India on February 12, 2001 and started operations on April 1, 2001.

Tata AIG Life offers a broad array of life insurance coverage to both individuals and groups, providing various types of add-ons and options on basic life products to give consumers flexibility and choice.

COMPARATIVE ANALYSIS:-

BIRLA SUN LIFE INSURANCE vs. LIFE INSURANCE CORPORATION OF INDIA

Birla sun life insurance

Name of the scheme

Saral jeevan plan

Purpose

BSLI saral jeevan plan comes with a bouquet of benefits, which fulfill needs of life cover and investment at an affordable rate.

Type of policy

Unit linked endowment plan

Returns and added benefits

An easy and simple plan

Earn efficient returns

Match your risk profile at every stage

Death benefits with a plus, that is, sum assured plus the fund value.

Unmatched liquidity

At the end of policy term you get fund value.

The policy can be surrendered at any time during the tenure of the policy subject to surrender charge. The charge will be zero after 4thpolicy year.

Payment of premium

Pay the premiums on an annual, semi-annual, quarterly or monthly mode.

Eligibility

18 to 55 years of age

Term of maturity

There is an option of three policy terms 10 years, 15 years and 20 years.

Tax benefit

Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

Life Insurance Corporation Of India

Name of the scheme

Jeevan saral

Purpose

jeevan saral plan comes with a bouquet of benefits, which fulfill needs of life cover.

Type Of Policy

Traditional plan

Returns and added benefits

Maturity benefit is total premium + bonus (approx Rs 50/thousand)

Death benefit is 250 times of monthly premium

The policy can be surrendered at any time during the tenure of the policy subject to surrender charge. The charge will be zero after 4thpolicy year.

Payment of premium

Pay the premiums on an annual, semi-annual, quarterly or monthly mode

Eligibility

18 to 70 years of age

Term of maturity

There is an option of three policy terms 10 years, 15 years and 20 years.

Tax benefit

Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

COMPARATIVE ANALYSIS OF BIRLA SUN LIFE INSURANCE AND TATA AIG LIFE

Birla sun life insurance

Name of the scheme

Gold-plus II plan

Purpose

A simple, hassle free plan it helps you strike the right proportion between protection and savings.

Type of policy

This is a non-participating unit linked savings plan.

Returns and added benefits

Match your risk profile at every stage.

Unlimited partial withdrawals after 3 policy years, free of cost.

The policy can be surrendered at any time during the tenure of the policy subject to surrender charge, the charge will be zero after 4thpolicy year.

At the end of the policy term you get the fund value.

On death the nominee will get the greater of (a) the fund value or (b) the sum assured reduced for partial withdrawals.

Minimum sum assured:5*annual premium

Additional coverage

Nil

Payment of premiums

Premium is paid for a period of 3 years with the flexibility to reduce premium (subject to minimum of Rs.10000) from the second policy year onwards without reduction in sum assured.

Eligibility

18 to 70 years of age.

Term of maturity

The policy term is 8 years.

Tax benefits

Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

Tata AIG life

Name of the scheme

Invest assure apex

Purpose

The plan provides a platform ensuring the upside potential of the equity markets while safeguarding the investor's interest by offering a guaranteed maturity unit price (GMUP).

Type of policy

This is a unit linked life insurance plan.

Returns and added benefits

Can make partial withdrawal only after completion of 3 years. A maximum of 4 partial withdrawals is allowed in one policy year. No charges are applicable.

Minimum sum assured: 5 times the annualized premium.

Maximum sum assured: 60 times the annualized premium.

The policy can be surrendered any time after 3 policy years by a written notice, subject to deduction of the applicable surrender charges.

On death the nominee will get higher of: the sum assured or the fund value.

On maturity the nominee will get higher of the fund value or the guaranteed maturity unit price multiplied by the number of units.

Additional coverage

Tata AIG life accidental death benefit rider.

Tata AIG life accidental death and dismemberment rider

Tata AIG life critical illness rider

Payment of premium

Premium is paid for a period of 3 years with the option to reduce, subject to minimum limit, which is higher of 75% of the first year regular premium paid or Rs.90000.the sum assured remains same even if reduction in premium is affected.

Eligibility

18 to 70 years of age.

Term of maturity

The policy term is 10 years.

Tax benefit

Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

Conclusion

Insurance is one sector that witnessed continuous growth owing to the reforms in 2000. The insurance sector is likely to attain a size of Rs. 2,00,000 crore ($ 51.2 billion) in 2009-10. In life insurance, the business grew by 23.3% to Rs. 93,000 crore in 2007-08 (Source:Assocham). The sector alone employs close to 30 lakh people (including agents and direct employees).

Through comparative analysis we are able to analyse the different products given by insurance companies to the customers so that they took more benfits of it.

A well-functioning insurance market plays an important role in economic development and financial stability of developing economies such as India's. First, it inculcates and encourages the habit of saving. Second, it provides a safety net to rural and urban enterprise and productive individuals.

The life insurance market in India is on a growth path. In spite of this, the country lags far behind the others in awareness about life insurance. The challenge is to spread awareness about life insurance and it true benefits. The industry has to convince people to park their hard earned money in long-term insurance and not just look at it as a tax saving instrument.

Suggestions and recommendation:-

People are not aware of the life insurance. Most of them know only one company which provides life insurance i.e. LIC. So awareness campaign should be run so that people are aware of different life insurance companies in India.

People should be educated about the different types of products or plans offered by the life insurance companies. Most of them don't know much of the different types of plan or products.

It was felt that most of the people took life for tax savings or just to cover up their life, not as an investment avenue. Life Insurance companies need to advertise in such a manner that people start investing in life insurance like the way they invest in the stock market

Insurance companies should try to adopt different strategies to market their products or plan. Companies should not primarily focus on the agents for their business.