Geneva Papers- Development of India's Insurance Market

International Association for the Study of Insurance Economics Études et Dossiers

Paper selected by Geneva Association for Essay on Development of India's Insurance Market in 2000.

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https://www.genevaassociation.org/media/40996/ga_ed_236.06_verma_operations,emerging_economies,legislation.pdf

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Extract from Études et Dossiers No. 236  Competition for Essays on the Development of India’s Insurance Market 2000 Geneva -

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INDIA'S INSURANCE MARKET BY VINAY VERMA

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Stunned by a savage economic crisis that has left business plans in tatters; Asia's insurance industry faces the classic conundrum of whether the rewards on offer are worth of risk they face in coming years. Premium volume has dried up, daims inflation sod and capacity sloshed in; bringing slashed rates and cutthroat competition. Commercial insurers have been hit by cancelled infrastructure projects, life insurers have seen premiums drops as people's incomes have fallen in real terms, while daims costs have risen as imported inflation soars. As a result of the economic turmoil insurance premium in many Asian countries have fallen at double-digit rates. These territories were seen as the emerging insurance markets in years to come but the broad outlook of Asia's insurance industrg has changed.

On the other side, in the same region, the mood of Indian Insurance Industry is totally different, as the insurance sector has witnessed double-digit growth both in the life as well as nou-life sector. The insurance sector in India is facing transformation from a monopoly to a competitive environment shedding its protectionist grab and usher in revolution. The passage of insurance bi has put to rest thousands of doubts over the Government's commitment on this issue. Now the focus of attention has moved to Indian insurance market, which holds enormous potential for growth in future. IMNC's are very bullish on India targeting the virgin Indian market also because of economies of scale as insurance companies survive on the principle of spreading the risk no matter what the size of each player, an insurer can't afford to operate in a niche market.

As India's economic reforms programme continues on its course of further liberalization exploring new vistas of growth, development and prosperity, the opening up of insurance sector for private players will really catapult India on to the high growth trajectory and this will give an impetus to the overall health of the financial sector. Momentous changes appear inevitable over the coming years. The good news is that liberalization of insurance in India can be turned into a 'winwin' situation. The stqte sector domestic companies, despite meeting their social objectives of going into the deepest interiors of the country, have lagged behind in  meeting customer expectations in products and services. This paper deals with the present situation of insurance in India and the development of insurance in the country within next fwe to ten years.

The first plan to form some sort of an insurance organization in India was proposed at the Government level when Si John Child, Governor of Bombay was instructed in 1685 by Court of Directors of East India Company to constitute an insurance office in India but it is not known what happened to these directions.

The growth and devehpment of insurance in India dates back to 19& century when Europeans started the Oriental Life Insurance Company in Calcutta in 1818. The first Indian Insurance Company 'Bombay Mutual Lie Assurance' came into existence in 1870 to cover Indian lives at normal rates. The year 1870 is more significant also because British government enacted for the first time the Insurance Act in that year. Four years later Ferowhah Mehta, one of the doyens of Indian financial sector institutionalition formed Oriental Government Security Life Assurance Company and after that many insurance companies surfaced on Indian soil. For regulation of insurance business the first Indian Insurance Act was passed in 1912 with enactment again in 1938 and amendment in 1950. This Act has been copied from the British and remains largely the same to date. Amendments effected on it have been of cosmetic nature but the most important provision of this Act, which is very peculiar, is Section 64 VB of the Act. This provision is uniaue in the insurance world which states that no insurer shall assume any risk unless and until the premium is received in advance or is guaranteed to be paid or a deposit is made in advance in the prescribed manner. It is also provided in said section that the risk may be assumed only from the date on which the premium has been paid in cash or cheque. This condition does not feature in most of the countries but it is a unique stipulation favoured upon

insurm operating in India.

Indian insurance industry witnessed two major turnarounds, first in January 1956 when control of all 154 Indian life insurers, 16 non-Indian insurers and 75 provident societies were transferred to Government of India's custodians as the life sector was nationdid. This step was taken when several insurance companies went into liquidation and unethical business practices were rampant in the industry. The second major turnaround was in the year 1972 when on the basis of recommendation of the Planning Commission of India general insurance sector was also nationalized and the 107 general insurance companies including branches of some foreign insurance companies were amalgamated and grouped into 4 companies vk National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United India Insurance Company Limited. They become the subsidiaries of a holding company, namely General Insurance Corporation of India that came into being on January 1,1973. Since then the insurance sector has developed under the protective umbrella of the Stata Planners of the country considered state ownership to be the best way to ensure benefits of this sector to reach all the sections of this society. This approach worked well in few decades and the premium of Life Insurance Corporation increased from Rs.88.65erores to more than Rs.19000 crores in lie sector and premium of General Insurance Corporation increased from Rs.lMcrores to more than Rs.7000 crore in non-life sector. Applying yardstick of growth, profitability, financial solvency, technology product development, reinsurance programme, overseas operations as per standard global norms performance of the Life Insurance corporation of India and General Insurance Corporation of India is outstanding. Despite the acceleration in growth of insurance business State monopolies were able to insure only about 24% of insurable population of this country and could fetch insurance premia of both life and non life accountsjust 2% of GDP as against 6-7 countries average of 9.2%. 

This industry shifted its gear once again in 1991, when the world was getting increasingly globalize India also proceeded on the path of economic reforms. As so much untapped potential was visible in the insurance sector the reforms in this sector became the need of the hour but because of the political compulsions the 

process of liberalization in this sector has witnessed far too slow pace as is evident in the following chart showing the insurance reform route in India. I April 1993 RN. Malhotra Committee oe haurnace settor

Rdows rad dercgPlrtioa rut up. January 1994 M;llbotra Committee rrubmits rrpOrt te Fufupee Minister. 1995 Finance Minister Mu~laoblpS in@ mys mest Government will decide on ha- dorms. Dee 1996 IRAbii introdufedinPadiraeatud &erred Tostmdingwmmatec August 1997 IRA bill is withdram fdlorvisg opporitim

F- participation ia the dowdie inlu-Seetor. Nw. 1997 Unioa Governmeat given grertu -y t0 hblie Ketor insurance cumpaoh.June 1998 Union budget rasounees qpeaing up oftbeIaso-Ketor. Aug. 1998 Iasorance Ombudsman set up Dee. 1999 IRDA bill pawed by the Padint and mceivea hm~oft P nsideat of India.

History has shown that it is very dificnlt to prosper in isolation. We have seen the collapse of the East European countries including the then USSR as well as change in developing ethos in communist China. Globalization is the new economic reality. It is a reality that is here to stay. India has also not remained immune to globalization and now when IRDA hill has been passed by the Parliament and the same has also received the assent of the President of India a self -fueling process has started and this is the beginning of a new era of borderless world of insurance in India. The operations of the private insurers are expected to be started in last quarter of this year. Apex industry chambers- FICCI, CII & ASSOCHAM are of the view that opening of the insurance sector would result in massive resource mobilization and restore investor confidence in the capital market. . The Indian insurance industry underwent a big change after nationalization of life and non-life sector. In pre-nationalization era life insurance was largely an urban phenomenon. Nationalized insurance sector continued effort to take life insurance to every possible corner of India and to every stratum of Indian society enabled it to reach it over to 13 crore lives. Today over 51% of the policies issued by LIC of India are sold in rural areas and the impetus on rural thrust can further visualized from the fact that nearly 50% of the LIC agents are from rural base and half of its branches are in mofussil area. Growth and operating results of life insurance business in India can be overviewed in the following table:

GROWTH OF LIFE INSURANCE BUSINESS IN INDIA

For statistics please refer the essay which is free to download at www.genevaassociation.org

The results shown above indicates that despite all handicaps LIC has been growing at healthy rate of around 20% whereas according to Sigma report on global insurance by 'Swiss-Re' the international market is completely saturated. In developed world the growth of life insurance premium has been a meager 1.5%.

In 1998-99 LIC achieved growth in new business preminm income of 28.3%. Not only in premium generation the fie insurance corporation of India has shown tremendous services in claim settlement also. LIC's pendency of claims is 5%, which is very dose to global average of 3%. The following table shows the claim settlement operations of LIC of India:

CLAIMS SETTLEMENT OPERATIONS OF LIC OF INDIA YEAR CLAIMS SETTLED IN RS. IN CRORE DEATH MATURITY TOTAL

For statistics please refer the essay which is free to download at www.genevaassociation.org

LIC, the monolith in life insurance sector has extensive marketing and distribution network hut still it has not been able to meet the global standards of covering insurable population. For a population of nearly a billion the total life insurance premium generated is Rs. 19000 crore an average yearly premium of Rs. 190 per head, an extremely modest figure even considering the low GDP in India. LIC of India has reached only to 24% of insurable population which is very low as compared to other countries as also shown in the following table:

For statistics please refer the essay which is free to download at www.genevaassociation.org

The above table shows that there is vast scope in this sector and even after entry of strong private players in this sector, LIC of India, due to its enormous network would continne to dominate the life insurance market. The premium income is

For statistics please refer the essay which is free to download at www.genevaassociation.org

Document free to download www.genevaassociation.org

The fire premium, which was Rs 8 crore in 1950, has increased to more than Rs.1900 Crore, Marine portfolio has also increased from Rs. 4 crore to Rs.1000 crore and miscellaneous business has increased from Rs.5 crore to Rs.4800 crore in same period. In 1998-99 despite industrial slowdown, GIC of India along with its 4 subsidiaries has managed to register a growth rate of 14.92% as against 10.21% in previous year. The consolidated premium income of the corporation, which includes its subsidiaries premium stands at Rs. 8844.43 crore as compared to Rs.7735.52 crore in previous year. Portfolio wise non-life direct premium written in India in 1997-98 has been shown in the following table: 

GROSS DIRECT PRE- IN INDIA

From the above table it could be seen that because of softening of rates due to market compulsions there was a decline in aviation portfolio and marine cargo premium was maintained somehow at same level. This kind of trend is further expected for few more years in aviation bemuse of down trend and decliningpaying capacity of said industry & softening of rates in reinsurance market. Dueto market adjustments in pricing in marine cargo, this portfolio will also not beshowing steady growth.

Despite slow pace in these portfolios, the other folders of general insurance haveshown steady growth. We can find out that from the given table that the growth of

insurance products both in commercial and personal lines of business is muchbetter in Indian market as compared to other parts of world as this market haslot of prospective yet to be exploited.

GIC along with its subsidiaries has an extensive network throughout the country and it also operates in about 35 countries. Organizational set up of life insurance Corporation of India and General Insurance Corporation of India and its four subsidiaries has been depicted in the following tables:

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With this huge set up and in depth networking, the state controlled insurance companies should not wony about any competitive challenge provided they improve their services to expected levels. The service provided by the subsidiaries of the General Insurance Corporation of India is not being generally appreciated because of the beaurocratic style of functioning of GIC officials which has brought a situation where as on 31.3.98 more than 8.5 lakh insurance claims were pending, worse close to 40% of these claims have been pending for more than one year. This is the area where State controlled companies have to give major thrust in order to compete in competitive environment, as the market has already been thrown open to private players.

Non-life business is written in India by four subsidiaries of GIC and among them New India is leading since nationalization. The market share of all the snbsidiaries has been shown as under:

MARKET SHARE OF SUBSIDIARIES OF GIC OF INDIA

Subsidiaries of GIC give more thrust to traditional premium, which contains major portfolio lie Fire, Marine, Aviation, Motor, and Engineering & Non Traditional. In recent years GIC subsidiaries have realized the importance of nontraditional rural portfolio and as shown in the following table we can see that last year there was a growth of more than 60% in no- traditional General Insurance Premium. This portfolio has vast potential and can give more & more profits in years to come.

Each country'has its own culture, its own economic ways and its own merits. The following table gives an idea about Indian conditions, which shows that India has a vast consumer base: -

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India - An Overview

GDP 96-97 US % 360 million

GDP growth rate 6.8%

Per capita Income US % 299

Area 3,287,500 sq.km

Population 930 million

Middle Class 200 million

Labour Force 375 million

PF Protection work 40 million

Urban population h=pn,ertgk 17.22 more [wing scope]

Doctors per lee of population 2.14

No of genuine hospitals 13692 [ 58% in pvt seetor]

Total inpatients admitted 1 crore

Growth Rate 1.6%

Land Area  3.3 million sq. Km.

Saving rate  Rs.250 per capita

Health Care Spending 15 crore
Priivate household exp in health care  20 crore

Population Insured  5 crore

The predominant feature of Indian Insurance market is that there is great scope of commercial line of insurance as we are developing at a very fast rate and there is also immense area still under tapped mainly in personal line & health insurance sector. Other features are:-

I) The pension market is another area with enormous potential simply because there is no organized social security net in India. The existing PF scheme, has worked well targeting mainly the organized work force

but as per estimates the total work force is about 375 million strong and of this huge pie, the organized work force covered by the PF scheme is estimated at a mere 10%. This opens up potential for not only more group pension plans but also individually directed pension plans.

2) Industry is continuously generating profits, this is even so when investments have to be parked as per regulated norms. But the underwriting results are in red from last so many years.

3) Insurance is still a state sector monopoly but now the sector has been opened to private players.

4) Legislation maintains strict separation between life Bi non- lie insurance.

5) Industry enjoys high level of taM protection in premium rates. Major portfolios like Fire, Motor, Marine Hull, and Engineering etc are tariff products. For some portfolios rates have been agreed by market agreement among the Indian insurers.

6) Tariff for Marne cargo & PA has been disbanded in 1994 as a result of Malhotra Committee Report.

7) Only Motor Third party insurance & Public Liability insurance for hazardous industries are in compulsory class of insurances in the country. Motor vehicles are required to be insured for an unlimited amount against third party liability for death or bodily injury including liability towards passenger on the vehicle.

8) Except for aviation all other class of non-life insurance are underwritten through the four subsidiaries of GIC . Now Aviation business is also written by subsidiaries. In case of large products most of the units are insured with all or more than one subsidiary.

9) Not a single Insurance Company has gone bankrupt because of an implicit government guarantee. All subsidiaries of GIC & LIC have been rated 'AAA7 by the best rating agency in India. Security is one

area where the state sector has a very good track record.

10) Commercial & Social insurance has been differentiated.

11)Insurance broking is not allowed till date but this new breed of intermediary will be introduced in new legislation.

12) TAC, which is primarily been represented by the existing state owned companies, has been put under supervision of IRA and it will be further broad based to include private players in future.

IRDA bill, opening the insurance sector to private and foreign companies has finally got the nod of Parliament in December 1999 and the assent of President of India in January 2000. This process of internationalization of insurance segment has thrown many vital issues - whether state sector will continue to be able to compete successfully against major overseas rivals. There is an identical threat from possible entry of nationalized banks in this sector, which enjoy a strong sense of credibility in this nation. Nothing could be further from truth that GIC & LIC are so well entrenched in organized network, financial strength & brand equity that new-players will take years to catch up. With deep pockets, investable funds& well established network

LIC & GIC do not have to worry about surviving. The real issue is to make them competitive. New entrants with a professional approach & state of art technology can revolutionize the market. The 26% equity for foreign players would enable both domestic and foreign players to participate productively in most effective manner. More important it would attract only serious players with proven track record. As the vast potentiality of the market is intact, Indian insurance market has attracted major foreign insurers and over two-dmn foreign insurers has already signed MOU with Indian partners.

The alliances forged so far have been shown in following table:

Table can be seen in original essay available on Geneva Association's website

Rakesh Mohan Committee estimates the total need for infrastructure investment at around Rs.7,50,000crore [ US $215 bn ] over next five years [ 2001-20051 estimates stress the need for vigorous drive to mobilize internal resources. In most countries, the insurance industry has led such a drive and helped channel household savings into long-term investments. With 80% of the insurable population still uncovered if everything goes well the insurance sector on its own will be able to cobble together 75% of the funds required to building India's power stations, new roads, ports and telephone lines. As per the projections of Confederation of Indian Industries [C I IJ lie insurance business in country will grow to Rs.1, 48,000cr in 2009-10 from current level of Rs.19, 000 crore. Pension business is expected to grow around Rs.14, Wcrore from Rs.930 crore during the same period. Non lie premium is ah projected to rise to Rs.37, 500 crore from Rs.8,000Crore and major contribution here will be from personal line which will increase to Rs.5,000 Crore from about Rs.400 Crore in the same period.

BENEFITS OF MARKET OPENING:

Liberalization of insurance sector has resulted in a tremendous spurt in business wherever the sector has been opened for competition. In Korea, Taiwan, Sri Lanka within 3-8 years of opening up insurance business grew by three times rate of GDP at a compounded growth rate of around 18%.India's premium income as percentage to GDP is as low as 0.5% which is krPrwv in comparison of liberated economies. Insurance premium income as % to GDP is 0.9% in Thailand, 1.5% in'~aiwan2, .6%in Korea and 3.3% in Australia.

In next few years it is expected that Indian insurance sector will be facilitated with following benefd of liberalization:

01 Competition will develop a better understanding of consumer requirements, leading to more customaries products apt for market place. There will be world-class technology & new and innovative products suitably fashioned to Indian needs. Competition will bring strong consumerism and wiU increase the market size.

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02 There will not only be increased efficiency and quality service to consumers, but also there will be wider choice of prices and there will be increased productivity.

03 Liberalization would lead to substantial increase in employment as witnessed in other parts of the Asian nations soon after opening of insurance sector. For e.g. in Malaysia employment increased from 14500 in

1992 to 19500 in 19% while in Thailand it rose to 22000 in 1992 to 34000 in 1996.

04 There will be inflow of managerial and financial expertise from the world's leading insurance markets. Further the burden of educating consumers will also be shared among many players.

05 There will be large pool of long term resources for financing infrastructure development

06 Regulatory norms of compulsory social obligation will enhance the rural coverage at affordable and reasonable price. Otherwise also this is a vast potential and virgin market, which competitors will surely like to capture in next few years.

07 The introduction of advanced selling techniques with international flavour will direct the sector towards a high growth trajectory.

08 International companies will help in building world-class expertise in local market by introducing the best global practices.

09 More and more funds will be mobilized for infrastructure development.

Foreign investment up to 26% will also make the thing easier for local promoters who will otherwise have to cough up huge amount of capital.

THREATS OF LIBERALIZATION:

The opening in the insurance sector has brought about overall buoyancy in the market all around. Any change has got both positive and negative aspects, soliberalization in Indian perspective will have both optimistic and pessimistic impact. Major threats perceived from competitive environment have been

discussed hereunder: 

01 Fear of market disorder: Liberalization in this sector will cause market-disorder because of fierce

competition and the domestic insurers will lose their base. This argument is baseless as cross-country experience shows that nowhere in the world have the entry of foreign insurers threatened the position of the domestic insurers. Whether it is Malaysia where the insnrance sector has been open for more than 50 years & foreign companies account for about 10% of market penetration or it is Indonesia, Thailand, China or Philippines where the market has been opened more recently, the total market share of foreign companies is less than 10% save in Indonesia where it is about 20%. Four years ago insurance premium accounted for jnst over 1% in China's GDP but since the market has been liberalized spending on insurance has grown at a

compound annual rate of 33%. In that country it is not jnst foreign companies alone that have grown but also the national PICC as well. The story is no different in South Korea where big 6 domestic players got increase in their business from 7 to 37 trillion Won by 1997. Closer home we have the experience of the banking sector where despite presence of 42 foreign banks, their share in the total banking assets is less than 10%.

02 Outtlow of domestic capital to overseas countries: This argument seems equally unfounded as set-up capital in this sector is huge and inflow of capital and breakeven in this industry will be much later and hence dividend are expected only after 8-10 years. Further Indian regulator is expected to put a cap on the dividend that foreign insurance companies will be allowed to repatriate. IRA is also going to make it mandatory for insurance companies operating in India, to put 50% of their surplus funds in government

securities.

03 Fear of Retrenchment & fear of loss of job: There is little fear of loss of job in the minds of employees, which has no reasonable ground as the experience of other countries shows employment has gone up with liberalization. Employment in South Korea after opening of insurance sector doubled over a period of 10 years; Thailand added another 50% jobs in insurance business just in 4 years. Substantial increase in employment has been witnessed in China, Indonesia, and Philippines & Malaysia. The number of people working in insurance sector in India is roughly the same as in UK with a population that is 117o~f India. The US with a population of 1/4* of the size of India has nearly 4 times the number of employees in Insurance sector as in India Insurance companies in state sector can join competition by diversifying into areas such as banking. In fact GIC has asked the Indian Government to allow it to venture into banking sector to effectively compete Bank & Financial institutions. LIC had also appointed consultants Born Allen & Hamilton to suggest a possible restructuring of the corporation as well as diversification into related business like banking. This is in line with the shape industq is taking worldwide. US giant AIG & Prudential Insurance

are among several international players who have acquired banking business. Incidentally one of the latest mergers in recent times has been that of travelers group which is largely into insurance with Citi Corp to form Citi-group. Distribution of insurance by banks is more than 50% of Life Insurance business in France, 30% in Spain and 15Oh in UK. In such a changing scenario substantial increase in employment expected to be witnessed in Insurance sector in next few years.

04 Growth of captive insurers: Like in developed countries, in next few years in India also large industrial, commercial and other organizations may develop ways of retaining more of their own risks. In recent years US commercial insurers have lost up to 35% of their total insurance premium to captive and other forms of risk retention. In UK direst insurers have similarly experienced a loss of similar business because of development of captive insurers and development of alternative risk transfer financial products. Numbers of

captives continue to rise worldwide. There were 3795 captive insurance companies recorded in 1996 with estimated total gross premium income of US % 19 bn.Indian insurers have been able to generate total premium up to 1.2% of GDP in lie sector and 0.6% in non-life sector. The low premium percentage of insurance to GDP and low per capita premium contribution as compared to developing and developed counties [as shown in following table] indicates vast potentiality of insurance sector in next 5 to 10 years .

Table can be downloaded free from essay available on  www.genevaassociation.org

State sector insurance companies have done remarkable job both in life and non life sector but there are millions and millions of untapped people in India who will be benefited from the competition.

PENSION MARKET IN INDIA:

Pension will be a great challenge for existing and new players in next few years. The study of pension market undertaken by the Life Insurance Corporation of India shows that total lives it covered is only 1 million whereas the potential it seems after incomes collation is close to 30 million lives. These identify a huge volume of pension business potential in India. At present only 10% of organized work force is covered by PF scheme and if exploited the market of pension can be exploited easily from about 375 million strong work force. Pension business is expected to grow around Rs.14000 crore in next 10 years from the present level of Rs.930 crore as per the projections of C I I. Pension which covers the risk of living too long is at present the domain of LIC of India along with little participation of other schemes like P.F., Central government's fund schemes and UTl's retirement plans but not much of the potential market has been exploited so far. In competitive environment private players are expected to do much better in this area by mobilizing people's money towards their own welfare.

PERSONAL LINE INSURANCE:

State sector insurers, because of their own compulsions, have failed to identify the need of the individual risk factors. The potential and scope of personal line of insurance is vast as this area is still under tapped and the covers are easy to sell. Growth of this portfolio is guaranteed in this country which has a strong base of 100 cmre population, where there are about 25 crore dwelling, 20 crore insurable cattle's, 2crore schools, colleges and educational institutes and about 5 crore small and big shops. Despite the market, the share in personal line of insurance in India is very low or negligible as shown in following table:

Table can be downloaded free from essay available on  www.genevaassociation.org

In a study made by one of the subsidiaries of GIC of India personal lines of insurance is the major thrust area for the next few years in India and the estimated premium projection in personal lines of insurance is substantial as can be seen in the following table:

Table can be downloaded free from essay available on  www.genevaassociation.org

Rise in anti-social activities like theft, burglary, riot, murders, Change in family structures exposing small units more to burglary risks, geographical concentration of middle and upper income house holds in cities and towns, increased tmfXc congestion and travel exposure creating enhanced possibilities of accidental injuries have made Indian society bare to more and more risks. Once this need of protection is converted into a right product the same will be much in demand in coming years. Further increase in saving rate, rising trend of per capita of insurable public, rise in medical treatment cost and continued increase in personal risks will attract more and more people to buy personal lines of insurance. The Confederation of Indian Industries in its study has estimated that in next 10 years personal line of insurance will increase to Rs.5000 crore from its present level of Rs.400 crore.

Like in all developing and developed countries the health care is the area, which the competitors will eye for in personal class of insurances. This portfolio has contributed major growth for insurers in recent years. India is also rushing into the managed care revolution these years and lot of debate is going on to exploit this under tapped area. GIC has already accorded the permission of Government to float a separate subsidiary to take care of this portfolio exclusively. It is also considering revamping of its marketing force & diversifying delivery outlets. The opportunities are vide open & this vast potential insurance area in India will be tapped suficiently by competitive players in non-life sector in next few years with compounded growth trend.

NEW PRODUCTS:

Competitive era will force players in insurance segment to adopt more belligerent & innovative marketing strategies including product differentiation & image building. There is a need for improvement in packaging and distribution system.

Private players are planning to insure the life events in India lie birth, death, manage, education needs etc There will be many product lines in commercial and personal line of insurances. At present LIC is lacking in its ability to push new products. More than 90% of LIC's premium income comes from two basic products- the endowment policy and the money hack policy. Other products are built around these products. However GIC and its subsidiaries, in recent few years, have floated many new products. General insurers have devised package covers as per the specific needs of the insured in place of many individual traditional covers. These package covers have been marketed with reduced cost of insurance, ensuring easy administration and improved risk coverage. One of such package cover is Industrial all risk policy which leaves nothing to chance. It is a comprehensive policy for industries with sum insured of Rs.100 crore with a package discount of 20%to 30% over and above the normal special rating discounts. Ofice umbrella policy, Traders policy, Householders policy are other package covers to mention. GIC is also planning to float a saving linked non-life wliq for the fist time in India Under this a fmed sum would be assured to the policyholders at the end of the term irrespective of any claims. At present such scheme exist only in Japan. GIC is approaching a Japanese consortium Tokyo Marine & Mitsui Marine to gain an insight into the mechanism of such schemes. Threat of competition has forced State controlled insurance companies to redefme their role and in next 5 to 10 years more and more efforts will be directed both towards-p ricing and.......................

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