INTRODUCTION:

1. As per the World Insurance Report, published by the reinsurance major “Swiss Re”, the global direct premium during 2011 dropped by 0.8 per cent against a surge at 2.7 per cent growth witnessed in the previous year. Globally, life insurance premium accounted for 57 per cent of total insurance premium. This share is higher in advanced economies than in the emerging markets. During 2011, global life insurance premium dropped by 2.7 per cent to USD 2627 billion. The premium volume fell in Western Europe, China and India, whereas, it rose in Middle East and Latin America.

2. The analysis and growth experience of the insurance industry in most countries indicate that the deepening and widening of the insurance services are positively correlated to the degree of competition and the number of firms in the market. In a closed and restricted market environment, the growth of insurance services slows down. The countries which have followed the open and liberalized policy have experienced quantum jump in the insurance services.

3. Another trend is that the growth was by and large higher in those countries where relatively less controls were imposed on insurance industries. Regulations and Controls if persuaded and imposed beyond a point may prove to be inhibitive and counterproductive.

INDIAN INSURANCE SECTOR:

1. After opening up of Insurance sectors, the capital requirements for starting a general or life insurance company is equity paid-up capital of Rs.100 crore and for starting a reinsurance company it is Rs.200 crore. The solvency margin requirement shall be highest of the following

(a) Rs.50 crore (Rs.100 crore for reinsurer); or (b) a sum equivalent to 25% of the premium income; or (c) a sum equivalent to 30% of net incurred claims.

2. As at end-September 2013, there are fifty-six insurance companies operating in India; of which thirty are in the life insurance business and twenty-seven are in non-life insurance business. In addition, General Insurance Corporation (GIC) is the sole national reinsurer. The life insurance industry recorded a premium income of `2, 87,072 crore during 2011-12 as against 2,91,639 crore in the previous financial year, registering a negative growth of 1.57 per cent. While private sector insurers posted 4.52 per cent decline (11.08 per cent growth in previous year) in their premium income, Life Insurance Corporation (LIC), the fully state owned insurance company, recorded 0.29 per cent decline (9.35 per cent growth in previous year), in its total premium underwritten. While the renewal premium accounted for 60.31 per cent (56.66 per cent in 2010-11) of the total premium received by the life insurers, first year premium contributed the remaining 39.69 per cent (43.34 per cent in 2010-11). During 2011-12, the growth in renewal premium was 4.77 per cent (6.23 per cent in 2010-11). First year premium registered a decline of 9.85 per cent in comparison to growth of 15.02 per cent during 2010-11.

PENETRATION AND DENSITY:

1. The potential and performance of the insurance sector is universally assessed with reference to two parameters, viz., insurance penetration and insurance density. These two are often used to determine the level of development of the insurance sector in a country. Insurance penetration is defined as the ratio of premium underwritten in a given year to the Gross Domestic Product (GDP). The insurance penetration in India, which surged consistently till 2009-10, has slipped since 2010-11 on account of slowdown in life insurance premium as compared to the growth rate of the Indian economy. Life insurance penetration had consistently gone up from 2.15 per cent in 2001 to 4.60 in 2009, before slipping to 4.40 per cent in 2010 and further slipping to 3.40 per cent in 2011.

2. Insurance density is defined as the ratio of premium underwritten in a given year to the total population (measured in USD for convenience of comparison)( Per capita premium). India has reported consistent increase in insurance density every year since the sector was opened up for private competition in the year 2000. However, for the first time in 2011, there was a fall in insurance density. The life insurance density in India has gone up from USD 9.1 in 2001 to USD

49.0 in 2011 though it reached the peak of USD 55.7 in 2010. The Insurance density of non-life sector reached the peak of USD 10.0 in 2011 from its level of USD 2.4 in 2001.

Indian Insurance in the Global Scenario:

1. In the life insurance business, India ranked 10^th among the 156 countries, for which the data is published by Swiss Re. During 2011-12, the life insurance premium in India declined by 8.5 per cent (inflation adjusted). During the same period, the global life insurance premium declined by 2.7 per cent. The share of Indian life insurance sector in global life insurance market stood at 2.30 per cent during 2011, as against 2.54 per cent in 2010.

Life Insurance Companies Operating in India:

Insurers	Regn. No.	Date of Registration	Year of Operation
PRIVATE SECTOR
Aditya Birla Sunlife Insurance Company Ltd.	109	31.01.2001	2000-01
Aegon Life Insurance Company Ltd.	138	27.06.2008	2008-09
Aviva Life Insurance Company India Ltd.	122	14.05.2002	2002-03
Bajaj Allianz Life Insurance Company Ltd.	116	03.08.2001	2001-02
Bharti AXA Life Insurance Company Ltd.	130	14.07.2006	2006-07
Canara HSBC OBC Life Insurance Company Ltd.	136	08.05.2008	2008-09
DHFL Pramerica Life Insurance Company Ltd.	140	27.06.2008	2008-09
Edelweiss Tokio Life Insurance Company Ltd.	147	10.05.2011	2011-12
Exide Life Insurance Company Ltd.	114	02.08.2001	2001-02
Future Generali India Life Insurance Company Ltd.	133	04.09.2007	2007-08
HDFC Standard Life Insurance Company Ltd.	101	23.10.2000	2000-01
ICICI Prudential Life Insurance Company Ltd.	105	24.11.2000	2000-01
IDBI Federal Life Insurance Company Ltd.	135	19.12.2007	2007-08
IndiaFirst Life Insurance Company Ltd.	143	05.11.2009	2009-10
Kotak Mahindra Life Insurance Ltd.	107	10.01.2001	2001-02
MaxLife Insurance Company Ltd.	104	15.11.2000	2000-01
PNB Metlife India Insurance Company Ltd.	117	06.08.2001	2001-02
Reliance Nippon Life Insurance Company Ltd.	121	03.01.2002	2001-02
Sahara India Life Insurance Company Ltd.	127	06.02.2004	2004-05
SBI Life Insurance Company Ltd.	111	29.03.2001	2001-02
Shriram Life Insurance Company Ltd.	128	17.11.2005	2005-06
Star Union Dai-ichi Life Insurance Company Ltd.	142	26.12.2008	2008-09
TATA AIA Life Insurance Company Ltd.	110	12.02.2001	2001-02
PUBLIC SECTOR
Life Insurance Corporation of India	512	01.09.1956	1956-57

Table 2: Total Life Insurance Premium

(r Crore)
INSURER	2013-14	2014-15	2015-16	2016-17	2017-18
Aditya Birla Sunlife	4833.05	5233.22	5579.71	5723.96	5903.00
Aegon	453.00	559.20	501.60	450.72	531.21
Aviva	1878.10	1796.25	1493.15	1336.51	1344.22
Bajaj Allianz	5843.14	6017.30	5897.31	6183.32	7578.37
Bharti AXA	872.65	1053.32	1208.33	1396.50	1684.39
Canara HSBC	1823.42	1657.02	2059.96	2294.71	2781.06
DHFL Pramerica	305.86	735.10	920.21	1142.10	1844.46
Edelweiss Tokio	110.90	193.08	310.07	441.33	638.26
Exide Life	1830.67	2027.48	2046.99	2408.58	2531.89
Future Generali	634.16	604.25	592.50	739.85	992.29
HDFC Standard	12062.90	14829.90	16312.98	19445.49	23564.41
ICICI Prudential	12428.65	15306.62	19164.39	22354.00	27068.77
IDBI Federal	826.25	1069.62	1239.67	1565.19	1783.24
IndiaFirst	2143.36	2034.11	1967.40	2265.17	2309.01
Kotak Mahindra	2700.79	3038.05	3971.68	5139.55	6598.67
Max Life	7278.54	8171.62	9216.16	10780.40	12500.89
PNB Metlife	2240.59	2461.19	2827.83	3236.08	3953.51
Reliance Nippon	4283.40	4621.08	4398.12	4026.82	4069.37
Sahara	204.63	166.86	157.05	153.94	112.03
SBI Life	10738.60	12867.11	15825.36	21015.13	25354.19
Shriram Life	594.24	734.66	1022.11	1207.94	1497.04
Star Union Dai-ichi	948.75	1134.68	1307.47	1510.88	1783.01
Tata AIA	2323.70	2122.66	2478.96	3171.08	4162.95
Private Total	77359.36	88434.36	100499.03	117989.25	140586.23
	(-1.33)	(14.32)	(13.64)	(17.40)	(19.15)
LIC	236942.30	239667.65	266444.21	300487.36	318223.21
	(13.48)	(1.15)	(11.17)	(12.78)	(5.90)
Industry Total	314301.66	328102.01	366943.23	418476.61	458809.44
	(9.44)	(4.39)	(11.84)	(14.04)	(9.64)

Note: 1) Figures in the brackets represent the growth over the previous year in percent.

INSURANCE PENETRATION AND DENSITY IN INDIA

Year	Density (USD)	Penetration (%)
2013-14	41	3.1
2014-15	44	2.6
2015-16	43.2	2.72
2016-17	46.5	2.72
2017-18	55	2.76

Source: Swiss Re, Sigma, Various Issues

RELATIONSHIP BETWEEN INSURANCE PENETRATION AND PER CAPITA GDP:

The ratio of insurance density to the insurance penetration is simply the per capita GDP, an indicator of per person economic activity of the economy. The per capita GDP is often regarded as a good proxy for the standard of living of the people in the economy and is often used to compare the relative standard of living between the economies.

There are several studies [Carter and Dickinson (1992), Enz (2000), Kamiya (2012), Sastry (2011), Sinha et al (2012), Zheng et al (2008), etc.], which have attempted to examine the nature of inter-relationship between the insurance penetration and the per capita GDP. These studies have revealed that a positive relationship holds between insurance penetration and per capita GDP. Insurance penetration normally increases with the increase in the per capita GDP. The relationship between the two could be linear or non-linear (curvilinear). A simple linear relationship will mean that the income elasticity of demand for insurance is a constant. In case, the relation is curvilinear, the elasticity would no more be a constant and would change with the level of per capita GDP and would be dictated by the mathematical form of the non-linearity (such as, exponential, logistic etc.). The studies of Carter and Dickinson (1992) and Enz (2000) indicated that the relationship between the insurance penetration and per capita GDP can be explained with an S-curve (a non-linear form). They demonstrated that the insurance penetration cannot go on increasing with the same pace forever with income per capita. The study of Enz (2000) proposed a logistic curve, which tracks an S-curve appropriately. Enz (2000) analyzed the insurance penetration by plotting it with the per capita GDP for select countries both for the life and non-life segments, separately. It revealed that there exists a level of per capita GDP at which the income elasticity of demand for insurance reaches to the maximum level for both segments

(life and non-life) of insurance. Subsequent to this point of maxima, the insurance penetration starts decelerating (increasing at a slower rate) with the increase of per capita GDP. The study also attempted to identify the countries, which are consistently above or below the S-curve, and indicated that these deviations are on account of other factors (for example, socio-demographic and cultural characteristics), which are largely country-specific, which affect the insurance business of these specific counties.

INDIAN SCENARIO (IN DIFFERENT STATES):

The scatter plot of S-curve in the study of Enz (2000) reveals that insurance penetration in India lies well above the point of the estimated S-curve. Accordingly, given the assumptions of model in Enz (2000), it is indicated that the insurance penetration in India is higher than what the S-curve suggests. It is interesting to note that there exist other prominent factors (other than the per capita GDP), which influence the growth of Indian insurance business positively. These factors could be demand driven (such as, socio-demographic characteristics of prospect/policyholders, risk appetite, etc.) or, supply driven (such as, quality of distribution channel, product innovation, etc.) or combination of both. While the presence of other factors (other than per capita GDP) is evident in case of India, it is expected that these would vary across various states and union territories of India. Treating these states and union territories as independent economies, the insurance penetration as well as insurance density of individual states and union territories can be computed using their respective Premium underwritten, GDP and Population.

DATA DESCRIPTIONS AND LIMITATIONS:

The state-wise computed data of insurance penetration and insurance density is provided. It has been computed annually for the period 2013-14 to 2017-18. The premium figures pertain only to the individual new business first year premium of life insurance.

The insurance penetration stands at 3.1 per cent in 2013-14, while the insurance penetration of total life insurance is 3.90 per cent. The insurance penetration of total life insurance penetration is 3.90 per cent in 2013-14 as per the Swiss Re estimates.

The state-wise data on Gross Domestic Product and per capita Net Domestic Product have been taken from the Central Statistical Organization (CSO). While CSO publishes both the Gross Domestic Product (GDP) and Net Domestic Product (NDP) for various states/UTs, it publishes only Per Capita Net Domestic Product and not the Per Capita Gross Domestic Product. In accordance with the definition of the insurance penetration, the GDP is used for the computation of insurance penetration of various states and union territories. Further, it is taken at the current prices in order to be compatible with the premium figures.

For the scatter plot between insurance penetration and the per capita GDP, the per capita NDP (at current prices) is used, as the per capita GDP is not available. Although, the per capita GDP can be computed by the formula [per capita GDP = (per capita NDP) * (GDP) / NDP] for various states / UTs, the same is not applied and rather the per capita NDP, as available directly, is used as a proxy for the per capita GDP. It may be mentioned that the per capita NDP for majority of states (including All India figure) lies between the range of 85 to 90 per cent of the per capita GDP consistently. Accordingly, by taking the per capita NDP for the scatter plot, the purpose of examining the nature of relationship between the insurance penetration and per capita GDP is well served.

The state-wise data on population is available through Census 2001 and Census 2011. These are used to estimate the state wise population data for various years (2006-07 to 2011-12) using the Compound Average Growth Rate (CAGR) of the respective states and union territories with application of simple interpolations.

India is a large country with 35 states/UTs with varying levels of per capita GDP, insurance penetration and insurance density.

APPRAISAL OF INDIAN INSURANCE MARKET:

MARKET SHARE OF LIFE INSURERS:

Table 10: Market Share: Life Insurers

In percent

Insurer	2016-17	2017-18
First year Premium (1)
LIC Private Sector	44.31 55.69	42.82 57.18
Total	100.00	100.00
Single Premium (20
LIC Private Sector	84.83 15.17	82.95 17.05
New Business Premium (3 =+1+2)
LIC Private Sector	71.11 28.99	69.36 30.64
Total	100.00	100.00
Renewal Premium (4)
LIC Private Sector	72.31 27.69	69.35 30.64
Total	100.00	100.00
Total Premium [5 ={3+4}]

The above table clearly infers that market share has decreased for public Life insurance company from 71.11% to 69.36% when compared with the Private life insurance company in 2017-18 in terms of New business premium. This shows private life insurance companies are gaining the market and LIC losing its ground slowly, but even though the LIC is still the market leader.

CONCLUSIONS:

1. In India, limit of 49% in foreign insurance shareholding has not arrested development of joint ventures with insurers of good reputation in global market. Global financial scenario is highly volatile with all socio economic models ranging from Corporate Capitalist Democracy of USA to Liberalized Communist model of China. In this scenario, we should protect our newly restructured insurance market from aggressive assaults from financially powerful groups.

2. Investment regulations for insurers are liberalized to a reasonable extent keeping adequate controls on the exposure of insurer’s fund to the unapproved investment in general stock market. But politically oriented investment, if they are taking place under pressure may cause problems for PSUs.

3. In the Insurance business, the new players are handicapped due to lack of data. The premium depends on the data of risk frequency of car accidents, burglary, fire or death. The new insurers are selling fresh policies that promise to challenge some of the basic paradigms of the state owned insurance monopoly. There is a tendency to target the business of existing companies rather than expanding the market by offering better service or other advantages.

4. New insurers can profitably focus on the retail segment, especially in general insurance. At present personal insurance including health, householders, shopkeepers, accident and professional indemnity coverage constitute 15% of Indian General Insurance premium. New entrants can enhance this figure.

5. Life Insurance potential can be examined by Insurers in details from three angles i.e. in terms of insurable population, savings and consumption expenditure. In India, less than 30% of total insurable populations have been insured. Joint efforts need to be made by all insurers to extend the coverage. Besides a wide range of product, there is need to focus on Single Premium.

6. Retirement and pension plan, Health insurance, Children’s plan. 46% of total household savings are in guaranteed return plan like NSC, PPF etc. There is need to convert to LI plans with regard to protection element, long term capital appreciation and dual tax benefits at investment and maturity. Less than 50% of total policies sold are in conventional plans; product mix is a good challenge.

7. Providing insurance cover to lower strata of society through various schemes, micro insurance need urgent attention.

8. E-Commerce and market conducts are two important areas which will strengthen the relationship between companies, consumers and regulators.

9. In most of the countries, Insurance industries have not been allowed to operate in a free and competitive environment and are saddled with avoidable restrictions. The market forces should be allowed to operate and determine as to which are the best products and optimum price in the interest of the consumers. Similarly most of the decisions relating to investment of funds, marketing of products, placement of reinsurance business should be left to marketing forces. The objective behind regulations is to ensure financial strength of the companies so that the interest of the policy holders are protected, the objective could efficiently be achieved through macro level policies and management. These companies may also be encouraged to observe self discipline and code of conduct. For instance, strict compliance to maintain solvency margin will itself ensure healthy financial strength. The method of disclosure norms may be extensively used and enforced. The objective of protecting the interest of the consumers may well be achieved through these macro management policies without any need to resort to regulate micro level activities of the companies.

10. There is no doubt at all that the Govt. monopoly over the insurance business had to end. There is crying need for better service more innovation and a comprehensive insurance cover. The obvious changes in the insurance markets are there for all to see new brands, new products, fresh advertising, and smart agents- all adding up to the excitement. Innovation of products, services, speed and adoption of technology and professionalism and above all operation cost (management+procuration cost) will decide the future fate of insurance industry.

REFERENCES:

1. Handbook on Indian Insurance Statistics, IRDA.

2. Sinha, R K, Nizamuddin M M and Alam, I (2012): An Investigation of insurance penetration and density of India by geography.

3. 16th Annual Conference of Asia-Pacifi c Risk and Insurance Association (APRIA), July 2012, Seoul, South Korea.

4. Swiss Re: Various Sigma Reports.

5. IRDA reports.

Received on 04.03.2019 Modified on 16.05.2019

Res. J. Humanities and Social Sciences. 2019;10(4):976-980.

DOI: 10.5958/2321-5828.2019.00160.8