CHAPTER 5

A COMPARATIVE STUDY BETWEEN LIFE INSURAN CE

CORPORATION AND GENE RAL INSURANCE CORPOR ATION

India’s economic development strategy immediately after

Independence was based primarily on the Mahalanobis model, which
gave preference to the investment go ods industries sector, with
secondary importance accorded to the services and household goods
sector (Nayar, 2001) 1. For example, the Mahalanobis model placed
strong emphasis on mining and manufacturing (for the production of
capital goods) and infrastruct ural development (including electricity
generation and transportation). The model downplayed the role of
the factory goods sector because it was more capital intensive and
therefore would not address the problem of high unemployment in
India. Any increase in planned investments in India required a higher
level of savings than existed in the country. Because of the low
average incomes in India, the needed higher levels of savings had to
be generated mainly by restrictions on the growth of consumption
expendi tures. Therefore, the Indian government implemented a
progressive tax system not only to generate the higher levels of
savings but also to restrict increases in income and wealth
inequalities. 2

1 Dreze, Jean and Amartya Sen (eds.) (1990), The Poitical Economy of Hunger, Oxford, Clarendon Press.
2 Sinha, Tapen and Sinha, Dipendra. "A Comparison of Development Prospects in India, 2003, page no. 12 4

163
 Among other things, this strategy involved canalization of

resources into their most productive uses. Investments were carried

out both by the government and the private sector, with the

government investing in strategic sectors (such as national defense)

and also those sectors in which private capital would not be

forthcoming because of lags or the size of investment required (such

as infrastructure). The private sector was required to contribute to

India’s economic growth in ways envisaged by the government

planners. Not only did the governmentdetermine where busin esses

could invest in terms of location, but it also identified what

businesses could produce, what they could sell, and what prices they

could charge.

Thus the strategy of economic development in India meant (1)

direct participation of the government in e conomic activities such as

production and selling, and (2) regulation of private sector economic

activities through a complex system of controls. In addition, the

Indian economy was sheltered from foreign competition through use

of both the “infant industr y argument” and a binding foreign

exchange constraint. Imports were limited to goods considered

essential either to the development of the economy (such as raw

materials and machines) or to the maintenance of minimal living

standards (such as crude oil and food items). It was further decided

164
that exports should play a limited role in economic development,

thereby minimizing the need to compete in the global market place.

As a result, India became a relatively closed economy, permitting

only limited economic transactions with other countries. Domestic

producers were sheltered from foreign competition not only from

abroad but also from within India itself. 3

The huge savings -investments gap could not be filled by the

amount of foreign aid that was both sought and available. Further,

additional foreign investments (both direct and portfolio) were never

seriously considered as a way to close this savings -investment gap.

Higher levels of income and wealth were taxed at much higher rates

relative to lower income and wealth. Further, as Rao (2000) notes, the

marginal rate of taxation including a tax surcharge was 93.5 per cent

in early 1970s. 4

Over time, India created a large number of government

institutions to meet the objective of growth with equity. The size of

the government grew substantially as it played an increasingly larger

role in the economy in such areas as investment, production,

retailing, and regulation of the private sector. For example, in the late

3 Bardhan, Pranab, 1997. “Corruption and development: a review of issues,” Journal of Economic
Literature , vol. 35, September, pp. 1320 -1346.
4 Bhalla, G.S., 2000. “Political economy of Indian development in the 20th century: India’s road to fr eedom
and growth,” Presidential Address at the 83rd Annual Conference of the Indian Economic Association ,
University of Jammu, Jammu and Kashmir, 30 December, pp. - 263.

165
1950s and 1960s, the government established public se ctor enterprises

in such areas as production and distribution of electricity, petroleum

products, steel, coal, and engineering goods. In the late 1960s, it

nationalized the banking and insurance sectors. To alleviate the

shortages of food and other agricul tural outputs, it provided modern

agricultural inputs (for example farm machinery, irrigation, high

yielding varieties of seeds, chemical fertilizers) to farmers at highly

subsidized prices (World Economic Indicators, 2001). In 1970, to

increase foreign ex change earnings, it designated exports as a priority

sector for active government help and established, among other

things, a duty drawback system, programmes of assistance for

market development, and 100 per cent export -oriented entities to

help producers export (Government of India, 1984). Finally, from the

late 1970s through the mid -1980s, India liberalized imports such that

those not subject to licensing as a proportion to total imports grew

from five per cent in 1980 -1981 to about 30 per cent in 1987-1988

(Pursell, 1992) 5. However, this partial removal of quantitative

restrictions was accompanied by a steep rise in tariff rates.

This active and dominant participation by the government in

economic activities resulted in the creation of a protected, highl y-

regulated, public sector-dominated economic environment. Along

5 Balachandran, G. (1998), The Reserve Bank of India: 1951 -1967, Oxford University Press, Delhi.

166
with this government domination of the economy, India soon faced

not only some major problems in its overall approach to

development, particularly in the area of industrialization (Ahluwalia,

1985)6, but also a dramatic increase in corruption in its economy.

Finally, like any other growing economy, the Indian economy faced a

number of serious sectoral imbalances, with shortages in some

sectors and surpluses in others.

India’s environment of r egulated economic development led to

the formulation of policies that were concerned with both

macroeconomic and microeconomic aspects. Whereas much attention

in the literature has been devoted to the macroeconomic issues, we

focus primarily on the microec onomic aspects of Indian economic

policies. In particular, we examine how individuals guided by their

self-interests of survival and wealth accumulation will act in a

regulated environment, which in fact discourages the pursuit of those

self-interests.

It shows how price ceilings can influence a nation’s economy.

Specifically, when prices are kept artificially low, demand outstrips

supply. To alleviate the resulting shortage of products and services,

the government can either help to increase the supply or help to

decrease demand for those products and services. Considering the

6 Dreze Jean and Amartya Sen (eds.) (1995), India: Economic Development and Social Opportunity, Oxford
University Press.

167
supply side options first, the government had the following choices:

(1) increase the price of the product; (2) subsidize production of

existing suppliers so they will produce and se ll more; (3) encourage

new businesses to enter the line of production and selling; or (4)

permit imports to reduce or eliminate the shortage. In India, none of

these options was seen as satisfactory. First, the government certainly

did not wish to increase prices, because price ceilings appealed to a

majority of the vote bank. Second, although the government did

subsidize production in several sectors considered essential, the

resulting increased production was not sufficient to eliminate the

large shortage s. Third, the government decided to restrict rather than

increase the entry of new producers under the pretext of directing

scarce resources into their efficient uses. Finally, it allowed only

limited recourse to imports, in order to protect Indian produce rs,

unless the shortage reached a stage of crisis. The overall result was

that inadequate amounts of products and services were supplied to

the market.

5.1 ECONOMIC REFORMS: THE MIXED RESULTS FOR

INDIA AND INSURANCE SECTOR

Due to government intervention, p articularly the high levels of

government subsidies, it was clear by 1990 that India was living

beyond its means. The result was a severe payments crisis in which,

168
for the first time, the government physically transported gold

overseas to prevent defaultin g on foreign commitments. To meet its

immediate balance of payments crisis, India also entered into a

structural loan adjustment agreement with the International

Monetary Fund (IMF). However, one condition of this loan required

India to undertake economic reforms to move from a centrally -

planned development strategy to one based on market -based

resource allocations. As a result, the government of India undertook a

package of economic reforms between 1991 and 1993, with the intent

of placing the market in pl ace of government controls as the prime

mover in the economic development process.

As one might expect, macroeconomic policy played a major

role in India’s economic progress in the 1990s. For example, Acharya

(2001)7 concludes that India’s devaluation of t he rupee and its

decision to increase the level of allowable foreign investment helped

it to make considerable economic progress. Joshi (2001) 8 and

Karunaratne (2001) 9 both say that India’s policy of selective capital

account liberalization helped it to ac hieve important economic

objectives (and still avoided the crises faced by the East Asian

7 Jalan, B (2000), ‘Finance and Development -Which Way Now?’ RBI Bulletin, January, 29 -45.
8 Jalan, B (2001), ‘Banking and Finance in the New Millennium’, RBI Bulletin, February, 215.232.
9 Rangarajan, C. (1998): “ Indian Economy – Essays on Money and Finance”, UBS Publishers’ Distributors
Ltd.

169
countries). Gupta (1999) 10 highlights the important role played by

India’s prudent management of exchange rate policy and its tight

monetary policy. Bhalla (2000) note s both the privatization of the

public sector enterprises and the gradual dismantling of the

government planning process in favour of market forces.

Overall, there can be no doubt that the reforms implemented

since 1991 have led to considerable economic pr ogress in India. For

example, from 1992-1993 through 2000 -2001, economic growth

averaged an unprecedented 6.3 per cent per year (Acharya, 2001) 11.

Further, as Bhalla (2000) 12 indicates, the rate of inflation and the fiscal

deficit have both decreased substan tially. He also says that India’s

improved exchange rate management has restored the confidence of

foreign investors, which in turn has led to improved financing of the

current account deficit and higher levels of foreign exchange

reserves. 13

The progress of Indian economic development from 1947 to the

present provides further evidence that individuals do respond to

incentives in their pursuit of self -survival and accumulation of

10 Rangarajan, C (2000): “Perspectives on Indian Economy – A collection of Essays”, UBS Publishers’

Distributors Ltd.
11 Reddy, Y.V. (2000), Monetary and Financial Sector Reforms in India, A Central Banker’s Perspective,
UBS Publishers, New Delhi.
12 Reddy, Y.V. (November 2000): “Fiscal and Monetary Policy Interface: Recent Developments in India”,
RBI Bulletin, pp.1257 -72.
13 A.K. Dasgupta Memorial Lecture at the 82nd Annual Conference of the Indian Economic Association ,
Guru Nanak Dev University, Amritsar, December 29.

170
wealth. Further, the nature of this response depends on the economic

climate, p articularly the role of the government. India’s economy

struggled as long as it was based in a system of government

regulation with little interaction with economic forces outside the

country. The economic reforms of the early 1990s set the stage for

substantial improvements in the Indian economy. As was stated

earlier, India’s economy grew at an average of 6.3 per cent from 1992 -

1993 to 2000-2001 (Acharya, 2001) 14. Further, its rate of inflation and

fiscal deficit both decreased substantially (Bhalla, 2000) 15. Improved

exchange rate management led to improved financing of the current

account deficit and higher foreign exchange reserves. Finally, India’s

GDP and per capita income both increased substantially from 1990 -

1991 to 1998-1999.

India can do more, howe ver, to further advance its economic

development. Indeed, one of the more recent microeconomic
approaches to economic growth is the promotion of entrepreneurial
activities. Entrepreneurial efforts have been found to generate a wide
range of economic benefi ts, including new businesses, new jobs,
innovative products and services, and increased wealth for future
community investment (Kayne, 1999) 16. The following narrative

14 Reddy, Y.V. (November 2001), Autonomy of the Central Bank: Changing Contours in Indi a, RBI Bulletin,
pp.1197-1211
15 Reddy, Y.V. (2001 b.), “ Developments in Monetary Policy and Financial Markets in India”, RBI Bulleti n,
pp.595-615. 32
16 Reserve Bank of India (1991) Report of the Committee on the Financial System (Chairman Shri
M.Narasimh am)

171
explains in considerable depth how entrepreneurial activities have
succeeded in several c ountries and how it can now be used to further
India’s economic development. 17

The GEM Conceptual Model suggests that the social -cultural -

political context within a country must foster certain “General
National Framework Conditions,” which can generate not only the
opportunities for entrepreneurship but also the capacity for
entrepreneurship – in particular, the skills and motivation necessary
to succeed. Together, the entrepreneurship opportunities, on the one
hand, and the skills and motivation, on the oth er, lead to business
dynamics that yield creative destruction, a process in which new
firms are created and older, less efficient firms are destroyed. The
overall result for a country is economic growth .

Given India’s economic progress in recent years, the country

may now be ready for the implementation of microeconomic policies
that will foster entrepreneurial activities. Fortunately, in addition to
the macroeconomic reforms mentioned earlier, India has taken other
steps to lay the foundation for the type of economic growth that can
be fostered only by entrepreneurial activities and appropriate
economic policies that reflect individual rights and responsibilities.
For example, in recent years India has made several important
structural changes, including th e construction of telecommunications
networks and the implementation of a nationwide road -construction

17 Joshi, Vijay, 2001. “Capital controls and the national advantage: India in the 1990s and beyond,” Oxford
Development Studies , vol. 29, 3, pp. 305 -320.

172
programme (Solomon, 2003) 18. Further, several thousand “new
economy” businesses – the types of businesses especially suited for
entrepreneurship efforts -were started in 2000 alone. 19

However, more than just opportunities should lead India to

consider entrepreneurial activities as a way to economic growth. At

least one major threat, a growing population, also should motivate it

to consider entrepreneurial eff ort as an economic policy. Specifically,

the country’s population is expected to increase by 110 to 130 million

people over the next 10 years, with approximately 80 to 100 million of

those new citizens seeking jobs that do not currently exist (Gupta,

2001).

5.1.1 CONTRIBUTION OF INSURANCE SECTOR TO INDIAN

ECONOMY

5.1.1.1 Insurance is the only sector which garners long term

savings

Insurers are increasingly introducing innovative products to

meet the specific needs of the prospective policyholders. An evolv ing

insurance sector is of vital importance for economic growth. While

encouraging savings habit it also provides a safety net to both

enterprises and Individuals.

18 Reserve Bank of India, (April 1993) Report of High Level Committee on Balance of Payments, (Apr il
1993) (Chairman Dr.C.Rangarajan).
19 Karunaratne, Neil Dias, 2001. “Revisiting capital account convertibility in the aftermath of the Cur rency
Crisis,” Intereconomics , vol. 36, 5 September/ October, pp. 264 -271.

173
 Insurance Companies receive, without much default, a steady

cash stream of premium or contr ibutions to pension plans. Various

actuary studies and models enable them to predict, relatively

accurately, their expected cash outflows. Liabilities of Insurance

companies being long -term or contingent in nature, liquidity is

excellent and their investme nts are also long -term in nature. Since

they offer more than the return on savings in the shape of life -cover

to the investors, the rate of return guaranteed in their insurance

policies is relatively low. Consequently, the need to seek high rates of

return s on their investments is also low. The risk -return trade off is

heavily tilted in favour of risk.

As a combined result of all this, investments of insurance

companies have been largely in bonds floated by GOI, PSUs, state

governments, local bodies, corpo rate bodies and mortgages of long

term nature.

Generates Long term funds for infrastructure and strong

positive correlation between development of capital markets and

insurance/ pension sector . For GDP to grow at 8 to 10%, qualitative

improvement in infrast ructure is essential. Estimates of funds

required for development of infrastructure vary widely. An

investment of 6,19,600 crore is anticipated in the next 5 years. Tenure

of funding required for infrastructure normally ranges from 10 to 20

174
years. The insu rance industry also provides crucial financial

intermediary services, transferring funds from the insured to capital

investment, critical for continued economic expansion and growth,

simultaneously generating long -term funds for infrastructure

development. 20

In fact infrastructure investments are ideal for asset -liability

matching for life insurance companies given their long term liability

profile. According to preliminary estimates published by the Reserve

Bank of India, contribution of insurance funds to financial savings

was 14.2 per cent in 2005 -06, viz., 2.4 per cent of the GDP at current

market prices. Development of the insurance sector is thus necessary

to support continued economic transformation. Social security and

pension reforms too benefit fro m a mature insurance industry. 21

The insurance sector in India, which was opened up to private

participation in the year 1999, has completed over seven years in a

liberalized environment. With an average annual growth of 37 per

cent in the first year premiu m in the life segment and 15.72 per cent

growth in the nonlife segment, together with the largest number of

life insurance policies in force, the potential of the Indian insurance

industry is still large. Life insurance penetration in India was less

20 Kayne, Jay, 1999. State Entrepreneurshi p Policies and Programs (Kansas City, Kauffman Center for
Entrepreneurial Leadership), page no. 165 -168.
21 Krueger, Anne O., 1993. Political Economy of Policy Reform in Developing Countries (Cambridge, MIT
Press), page no. 35-36.

175
than 1 per cent till 1990 -91. During the 1990s, it was between 1 and 2

per cent and from 2001 it was over 2 per cent. In 2005 it had increased

to 2.53 per cent. 22

5.1.1.2 Spread of financial services in rural areas and amongst

socially less privileged

IRDA Regul ations provide certain min imum business to be

done - in rural areas - in the socially weaker sections . Life Insurance

offices are spread over nearly 1400 centres. Presence of representative

in every tehsil – deeper penetration in rural areas.

Table 5.1

Year No. of Policies Sum Assured

2004-05 55 lakhs 46000 crores

2005-06 65 lakhs 66000 crores

2006-07 84 lakhs 99500 crores

2007-08 109 lakhs 138000 crores

2008-09 133 lakhs 198000 crores

2009-10 158 lakhs 214000 crores

Source : Economic Survey, 2010

Insurance agents numbering over 6.24 la khs in rural areas. In

the financial year Policies sold in rural areas (2004-05) - No. of

22 Economic Survey, Gover nment of India, 2006, page no. 105 -106

176
policies - 55 lakhs, Sum assured 4 6,000 crores, (2005-06) - No. of

policies - 65 lakhs, Sum assured 66,000 crores, (2006-07) - No. of

policies - 84 lakhs, Sum assured 99,500 crores, (2007 -08) - No. of

policies - 109 lakhs, Sum assured 1,38,000 crores, (2008 -09) - No. of

policies - 133 lakhs, Sum assured 1,98,000 crores, (2009 -10) - No. of

policies - 158 lakhs, Sum assured 2,14,000 crores, Social security No.

of lives covered 200 9-10 17.4 lakhs 2004-05 42.1 lakhs.

5.1.1.3 Employment generation

Life insurance industry provides increased employment

opportunities. Employees in insurance sector as on 31st March, 2005

is around 2 lakhs. M any agents depend on insurance for their

livelihood. No. of agents on 31st March 2004 – 15.59 lakhs. Brokers,

corporate agents, training establishments provide extra employment

opportunities. Many of these openings are in rural sectors. 23

Insurance is a wid ely used financial service used primarily to

diversify and pool risks so that the consequences of randomly

occurring events do not cripple individuals and businesses. Insurance

also facilitates long -term savings through savings and investment

products, red uces losses through risk management expertise, and

transmits information about risks throughout society so economic

factors can make more informed decisions.

23 Ibid

177
 Life insurance includes mortality protection -only life insurance

products, such as term life (wit h no money returned to policyholder

after coverage expires) and savings -investment life insurance

products, such as whole life, variable life, and universal life.

Non-life insurance includes all property and liability insurance,

such as auto liability and collision, fire, hail, flood, aviation and

marine, and health insurance.

Weather derivative s are financial instruments that can be used

to reduce the risk associated with adverse or unexpected weather

conditions, serving as a form of hedging against pote ntial losses.

Insurance penetration is the level of insurance used in an economy as

measured by total insurance premiums collected by the insurance

market divided by Gross Domestic Product (GDP).

Given the lack of global information on insurance market

development, USAID contracted Chemonics International and the

International Insurance Foundation to assess 1) the link between

strengthening the insurance industry and economic growth and

development in developing countries, and 2) possible donor

interventi ons that would support the development of insurance

products in different types of countries, with what preconditions and

for what level of investment.

178
5.1.2 LINKS BETWEEN INSURANCE DEVELOPMENT AND
ECONOMIC GROWTH

It considers the current state of insura nce market technical

assistance, and examines key relationships between insurance and

economic growth indicators using an international insurance dataset.

The three key findings that arise from this analysis are: 1) countries

are much more likely to experi ence sustained growth if their

insurance markets develop well; 2) insurance market development is

closely related to improved financial sector performance; and 3)

insurance markets do not develop adequately without both public

and private sector investment in their infrastructure.

The researcher identifies the links between insurance, financial

sector performance and growth in substantial detail, helping define

the insurance – economic growth relationship and supporting the

policy conclusions . The thrust of these links is that insurers

encourage a greater efficiency and depth in the financial sector, by

complementing, competing, and otherwise improving the services

offered by other financial institutions. Some of the specific points

made are summarized below :

• Insurers measure and manage non -diversifiable risk faced

by creditors and borrowers more efficiently than other

financial institutions, facilitating the provision of credit.

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 • Because of their success in marketing contractual savings

products and t he nature of their liabilities, life insurers

(and to some extent non -life insurers) can be an important

source of long -term finance.

• Insurance facilitates investment in infrastructure and

high-risk/ return activities, by generating sources of long -

term finance, and helping measure and manage high -risk

exposures.

• By mobilizing substantial funds through contractual

savings products, and investing them in bonds and

stocks, insurers help stimulate the growth of debt and

equity markets.

• As institutio nal investors, insurers pressure equity

markets to adopt stronger corporate governance

measures and greater transparency.

5.1.3 LINKS BETWEEN INSURANCE TECHNICAL

ASSISTANCE AND GROWTH

Despite the existence of substantial research linking insurance

market development and economic growth, there is yet little data

showing direct causality between technical assistance to the

insurance industry and growth. . The case for technical assistance is,

180
however, quite compelling: both the role that insurance plays in

economic growth and the need for insurance market technical

assistance in emerging markets are clearly shown. This fact no doubt

has much to do with the increasing attention paid by leading donor

agencies to insurance market interventions in the last decade .Well -

designed technical assistance to the insurance market as a means to

more rapid development of the financial sector and increased

economic growth is becoming an essential component of the widely

recognized development framework. 24

5.1.4 STAGES OF INSU RANCE MARKET DEVELOPMENT

It is easier to understand how to strengthen insurance markets

by first understanding their development cycle. To perform well and

grow, insurance markets require investment in infrastructure, which

includes institutions, technica l resources and capacity, as well as the

existence of suitable economic, legal, and political environments. This

paper identifies the internal building blocks of market infrastructure,

as well as the external environmental factors, that are commonly

decisi ve during each of the four stages of insurance market

development: 1) dormant; 2) early growth; 3) sustained growth; and

4) mature. 25

24 Roy, Samit. "Insurance Sector: India." Industry Sector Analysis, National Trade and Development Boar d,
US Department of State, Washington, DC, December 1999, page no. 165 -168.
25 Sigma. "World Insurance in 1999." No. 9/ 2000. Published by SwissRe. Available at www.swissre.com.

181
5.1.5 STRATEGIES FOR TECHNICAL ASSISTANCE

To assist donor agencies and policymakers determine which

countries might benef it most from insurance market intervention, it

provides a preliminary means to compare levels of insurance market

over or under -development, and assess its consequences for the

potential economic pay -off from insurance market technical

assistance. It also provides guidance on selecting the most relevant

type of technical assistance for a particular country, based upon its

stage of economic, political, and insurance market development. The

various types of insurance market technical assistance that are

recommended include the following:

• Conducting insurance sector assessments, ideally in

conjunction with financial sector assessments to

encourage synergies and cost savings.

• Improving insurance regulation and supervision by

encouraging the application o f International Association

of Insurance Supervisors’ core principles and other global

best practice standards.

• Encouraging the collection and sharing of insurance data,

possibly through public -private partnerships with the

Insurance Services Office, t he Insurance Data

182
 Management Association, and Standard and Poor’s,

among others.

• Building actuarial resources through the development of

formal education and apprenticeships that emphasize

experiential learning.

• Supporting professional insurance ed ucation, by

providing access to or developing a range of off -the-shelf

training materials in a broad range of topics and adapting

them to local environments, as well as supporting

scholarships and exchanges.

• Educating markets and consumers on standards by

facilitating exchanges of information, establishing a self -

regulatory industry organization, and providing models

of consumer education websites.

• Encouraging ethical market discipline by disseminating

adequate information (possibly through rating a gencies)

and ensuring proper incentives and enforcement.

• Promoting institutional development in multiple ways,

from developing actuarial databases and strengthening

information systems to product development and

marketing.

183
 • Connecting regulators wit h the private sector by

nurturing effective communication links between

insurance supervisors and private sector executives.

5.2 INSURANCE, FINANCE AND ECONOMIC

DEVELOPMENT

The Researcher have looked at insurance markets in different

countries and over d ifferent time periods, applying econometric
techniques to separate and control for the effects of many known
factors in growth, as well as to identify the probable causal direction
between these factors and growth. We have attempted to answer the
question: does insurance contribute to growth, or is it simply a by -
product of economic growth? The study has sought not only to
understand whether insurance makes an important contribution, but
also if this contribution can be measured empirically.

The study testing the causal relationship has found evidence

that insurance market development is a supply -leading phenomenon .
While the number of studies carried out to date is limited, being
greatly constrained by the lack of available insurance data, the few
existing studies present a number of strong arguments, backed up by
rigorous and methodological data analysis, advancing the conclusion
that insurance is an agent, and not just a by -product, of growth.
Using Granger causality tests, Soo (1996) 26 found that life ins urance

26 Reserve Bank of India, The Report on Currency and Finance (1998 -99, 1999-00 and 2000-01)

184
contributed to the productivity and economic growth of the United
States over a 30 -year period. His study concluded that much of life
insurance’s impact on growth was likely due to the huge contribution
that life insurance made to U.S. financial int ermediation and
investment over this period. A follow -up study by Kugler and Ofoghi
(2005)27, using Granger causality tests with disaggregated measures
of specific classes of life and non -life insurance in the United
Kingdom, found that eight out of nine cl asses of insurance showed
evidence of causing economic growth in the UK. The results implied
that stronger causal relationships between insurance and growth
could be found across countries if the bias introduced by using
aggregated measures of insurance we re avoided.

In a larger, multiple -country study, using a different

econometric technique, Webb, Skipper and Grace (2002) 28 found that
both banking and life insurance penetration were robustly indicative
of increased productivity (as measured by increase in growth rate of
real GDP per capita) in 55 countries over the period from 1980 to
1996.

Patrick (1966) 29 noted that the correlation between financial

activity and economic growth could be either supply -driven, where a
greater supply of financial sector capa city and activity drives
economic growth, or demand -following , where greater financial

27 Reserve Bank of India, Annual Statements on Monetary and Credit Policy and Mid -term Review s of
Monetary and Credit Policy for the years 1997 -2001.
28 Tarapore S.S. (2000), Issues in Financial Sector Reforms, UBS Publishers.
29 Reserve Bank of India, Annual Report for the years 1997 -2001.

185
activity and capacity merely follow economic growth because there is
a greater demand for it as the economy grows.

5.2.1 INSURANCE’S ROLE IN FINANCIAL SECTOR

DEVELOPME NT.

The depth and efficiency of a country’s financial sector largely

determine how well its economy allocates resources. Wide agreement

has been reached regarding the importance of a strong financial

sector to economic growth. Greater financial depth (i.e . greater

variety and availability of financial services and instruments)

advances economic growth by providing economic agents more

opportunities to save, invest, and borrow. Financial efficiency is a

measure of how cost effectively these economic agents operate.

Greater financial depth and efficiency translate into increased levels

of financial intermediation, investment, and productive resource

allocation. 30

The mechanisms through which insurance works to stimulate

economic growth revolve around the role insurance plays in

deepening and improving the efficiency of the financial sector.

Studies show that insurance influences financial activity in the

following ways:

30 Pursell, Gary, 1992. “Trade Policies in India,” in Dom inick Salvatore, ed National Trade
Policies: Handbook of Comparative Economic Policies , vol. 2 (New York, Greenwood Press).

186
 Insurers measure and manage non -diversifiable risk faced by

creditors and borrowers more ef ficiently than other financial

institutions, facilitating the provision of credit.

A common measure of financial depth across countries and

over time is the ratio of currency to narrow money (M1) or the ratio of

broad money (M2) to nominal GDP. This measu re somewhat

crudely attempts to measure how well the financial sector caters to

savers and how well it serves borrowers who want to raise capital for

real long-term investment.

Insurers generate price signals for risk that enables the

economy to allocate its resources more efficiently among activities.

Insurers often offer more competitive and long -term

contractual savings vehicles than other financial institutions.

Because of their success in marketing contractual savings

products and the nature of thei r liabilities, life insurers (and to some

extent non-life insurers) can be an important source of long -term

finance.

Insurance facilitates investment in infrastructure and high -

risk/ return activities, by generating sources of long -term finance, and

helpin g measure and manage high -risk exposures.

187
 By mobilizing substantial funds through contractual savings

products, and investing them in bonds and stocks, insurers help

stimulate the gro wth of debt and equity markets.

As institutional investors, insurers pre ssure equity markets to

adopt stronger corporate governance measures and greater

transparency.

5.2.2 INSURANCE CONTRIBUTES TO AND IMPROVES THE

EFFICIENCY OF CREDIT IN VARIOUS WAYS

Insurance markets contribute to investment in infrastructure

and high-risk / return activities by providing price signals regarding

project risks, offering insurance coverage against undiversifiable

risks, and generating long -term funds through collecting premiums

that can be invested in long -term projects. Uncertainty affects

entrepreneurship, investment, and social progress, threatening to

curtail growth if it is not well managed. Banks, investment

companies, pension funds, and capital markets combine their

resources with insurance companies to accumulate information,

consolidate and diversify risks, and manage this uncertainty.

Insurance coverages implicitly measure and price risks, thus

providing signals regarding the project risks. When risks cannot be

managed, or when they are not adequately mitigated through risk

management and safety measures, insurance coverages will change,

188
signaling the nature of these underlying risks to potential investors.

These price signals and provision of coverage help reduce the

transaction costs of investors and borrowers, as they clarify the

nature and price of these underlying undiversifiable risks. Hence, it is

not surprising that insurance is generally a necessary precondition in

many mortgage finance markets and large -scale industrial

investments. 31

5.2.3 INSURANCE COMPANIES, ESPECIALLY LIFE I NSURERS,

FACILITATE LARGE AMOUNTS OF CAPITAL
ACCUMULATION

By offering products with various combinations of life

insurance and savings benefits, life insurers add financial depth to an

economy, simultaneously encouraging long -term savings. The benefit

of long-term funds to emerging market investment and productivity

has been pointed out by various researchers.

The World Bank Development Report (1994, p.107) highlights

the fact that the growth in life insurance assets provides a scarce, but

highly valuable commodity in developing countries —long-term

finance—saying that “Contractual savings institutions, such as

pension funds and life insurance companies, are particularly suited

31 Rao, M. Govinda, 2000. “Tax reform in India: achievements and challenges,” Asia-Pacific Development
Journal, vol. 7, No. 2, Decemb er 2000, pp. 59-74.

189
to making long -term investments. These institutions levy fixed

premiums, have st eady and predictable cash inflows, and incur long -

term liabilities, making them ideal suppliers of long -term finance for

infrastructure projects.”

World Bank researchers Musalem, Impavido, and Tressel (2001)

studied the relationships among life insurance companies, pension

funds, and banks in 34 countries and found that the development of

life insurance companies and pension funds is associated with more

efficient banking systems. Their explanation was that life insurers

and pension funds, as contractual s avings institutions, compete with

banks. In response to the competition, banks concentrate on their

comparative advantage, their superior ability to monitor firms, and

provide short -term loans, thus increasing the efficiency of the

financial sector.

5.2.4 LIFE INSURANCE ALSO CONTRIBUTES TO CAPITAL

MARKET DEVELOPMENT

Musalem and Impavido (2000) examined the growth of life

insurers and pension funds across 34 countries over a 15 -year period

and found that the rapid growth of these contractual savings

instit utions partly explain the rapid growth of stock markets.

Another World Bank study, conducted by Vittas (1998) also

concludes that insurance companies and pension funds can provide a

190
strong stimulus to the development of securities markets. This

relationshi p occurs because life insurers and pension funds can

accumulate large amounts of savings in countries, which, in turn, are

invested in businesses through equities and bonds. The result is that

as life insurers grow, they channel large amounts of medium - to

long-term funds through capital markets, deepening the country’s

financial sector. 32

5.2.4.1 As Institutional Investors, Life Insurers Exert A Positive

Impact Upon The Transparency And Liquidity Of Equity
Markets

Vittas (1998) describes the important rol e that life insurers have

had in enhancing corporate governance by requiring greater

information disclosure and in stimulating financial innovation and

modernizing capital markets, mostly in mid -level developing to

developed countries. The 1989 World Devel opment Report suggests

that “Because pension and insurance institutions are likely to be

relatively large and therefore able to afford professional

management, these managers can play a role in monitoring and

control of the firms in which they invest.” Better managed

investments in turn improve the efficiency of the financial sector.

32 Reynolds, Paul D., Michael Hay, William D. Bygrave, S. Michael Camp and Erkko Autio, 2000, page no.
107-108.

191
5.2.4.2 Insurance And Financial Sector Development Are Mutually
Supportive

The economic benefits produced by a strong insurance market,

through its effect on financial sector efficiency and depth, are

identified within the study by Webb, Skipper, and Grace (2002).

Using 16 years of data from 55 countries, this study finds that when

higher levels of banking and insurance activity coexist, countries are

more likely to have highe r levels of economic growth. The finding is

particularly noteworthy in that it shows that higher economic growth

can not be explained as well by the individual development of

banking or insurance markets as it can by the joint development of

these markets.

5.3 STAGES OF INSURANCE MARKET DEVELOPMENT

Insurance market growth rates seem to vary according to the

state of the enabling environment, which includes economic, legal,

and political factors, as well the existence of the necessary internal

building bloc ks of insurance markets, such as institutional

infrastructure, technical resources and capacity.

With largest number of life insurance policies in force in the

world, Insurance happens to be a mega opportunity in India. It’s a

business growing at the rate of 15-20 per cent annually and presently

192
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

collection is nearly 2 per cent of GDP and funds available with LIC

for investments ar e 8 per cent of GDP. 33

Yet, nearly 80 per cent of Indian population is without life

insurance cover while health insurance and non -life insurance

continues to be below international standards. And this part of the

population is also subject to weak social s ecurity and pension

systems with hardly any old age income security. This itself is an

indicator that growth potential for the insurance sector is immense. 34

A well -developed and evolved insurance sector is needed for

economic development as it provides lon g term funds for

infrastructure development and at the same time strengthens the risk

taking ability. It is estimated that over the next ten years India would

require investments of the order of one trillion US dollar. The

Insurance sector, to some extent, can enable investments in

infrastructure development to sustain economic growth of the

country. Insurance is a federal subject in India. There are two

legislations that govern the sector - The Insurance Act - 1938 and the

IRDA Act - 1999. The insurance secto r in India has come a full circle

33 Economics Survey, Government of India, 2009, page no. 65

34 Rodrik, Dani, 1996. “Understanding economic policy reform,” Journal of Economic Literature , vol.
XXXIV, March, pp. 9 -41.

193
from being an open competitive market to nationalisation and back to

a liberalised market again. Tracing the developments in the Indian

insurance sector reveals the 360 degree turn witnessed over a period

of almost two cen turies. 35

INSURANCE, both life and general, are widely perceived to be

nursing easy constituencies and lax in customer service. Insurance

products, especially non -life, have not touched most Indians in any

significant way, especially in the unorganised sect or. Not many

would disagree that the development of insurance needs to be

intensified significantly.

A definitive action on the insurance reforms process started

with parliamentary approval for the Insurance Regulatory and

Development Authority (IRDA) Bil l in November 1999, albeit almost

six years after the Insurance Reforms (Malhotra) Committee Report.

It is a good augury that the MPs have consciously tried to soften the

restrictive connotation of the term `regulatory' by using it in

conjunction with `dev elopment'.

It is of primary importance both vis -a-vis national economy and

international trade. Insurance premium cash flows generate funds for

investment in the economy. The development of the insurance sector

35 Sinha, Tapen. Pension Reform in Latin America and Its Implications for International Policymakers. Boston,
USA, Huebner Series Volume No. 23, Kluwer Academic Publishers, 2000.

194
would depend on the gen eral level of economi c developm ent and

prospects for the immediate future. Generally there is a positive

correlation between the economic development of a country and the

amount the people spend on insurance.

India ranks 23rd in the world with total insurance business

(premiu ms) of a little over $7.2 billions (non -Life: over $2 billions,

32nd rank; life: over $5 billions, 20th rank). The spread and reach of

insurance remains, ev en after so many years of natio nalisation,

skewed and urban -oriented. India has an insurance density , which is

premium $ per capita of only 7.6 (non -life: 2.2; life: 5.6), and ranks

82nd in the world. Insurance penetration, which is premium as share

of GDP (per cent), in India is a me asly 1.95 (non-Life: 0.56; life: 1.39),

and ranks 51st in the world 36.

The country is behind even amidst the Asian countries. Non -

Life sector is more sluggish than life in terms of the spread and reach.

Its slender progression has to be further qualified by the facts that: (a)

most of the growth in the non -life business is in the corporate sector

and linked to institutional finance, and to the motor business with

compulsory third party insurance, (b) the nationalised insurance

36 Ajay Chhibber is the UN Assistant Secretary General and Assistant Administrator & Regional Director of
the Bureau for Asia and the Pacific, UNDP. Thangavel Palanivel is the Sen ior Advisor and Programme
Coordinator at the UNDP’s Asia -Pacific Regional Centre in Colombo. The usual disclaimer applies.

195
sector has had a free run, as the Government kept the real

competition out by law.

The IRDA has the daunting task _ to establish and promote fair

competition in hitherto monopolistic insurance market. It will have to

do it in a manner that will whip up sustainable growth in the national

insurance market, and, in the final analysis, sup port the greater

national economic growth.

The General Insurance Business (Nationalisation) Act, 1972

explicitly mentions the necessity of `securing the development of

general insurance business in the best interest of the community', as a

rationale of nationalisation of t he insurance business in the early

1970s. Regardless of the performance of nationalised insurance

companies in achieving this objective, it would be incorrect to

dismiss the matter of social linkages of insurance business as

redundant socialist rhetoric. T he governments of the developed

markets, by themselves and in association with insurance regulators,

have intervened in many ways to find, facilitate, and further social

purposiveness of the insurance business.

Developed countries have adopted an integrat ed risk

management approach that includes use of insurance, both public

and private, to stabilise the agriculture industry. Insurance

complements, on the one hand, activities designed to strengthen the

196
base of agriculture that is, irrigation drainage, land reclamation, and

other means of increasing agricultural productivity; and, on the other

hand, pricing and other income support measures. Agriculture

insurance should be playi ng an even greater role in Indi a, as not only

this sector's contribution to GDP i s relatively high, but also the

majority of the people are engaged in agriculture and related

occupations.

The Indian nationalised insurance sector has not been able to

make any significant dent in agricultural and rural insurance. The

Government must tak e the initiative to find a judicious mix of private

and public insurance ef forts, as part of integrated ri sk management

package, to be administered by the Ministry of Agriculture. It must

set clear definitions and mandate for public and private insurance,

after due consultations with state governments, agriculturists, and

the insurance industry. The insuranc e regulation in India must

quickly develop regulatory norms for addressing availability and

affordability of appropriate agricultural and rural insuranc e

products.

All over the world, regulation of the insurance sector has been

taking new dimensions ever since the process of globalisation begun.

It is being increasingly felt that a balanced and sustained growth of

the insurance sector is necessary for th e sustenance of the

197
globalisation process. Developed countries have had a long tradition

of insurance supervision and have come to appreciate the benefits of

a sound supervisory regime. There, the paradigm of insurance

regulation has shifted to more proact ive super vision, monitoring,

and facilitation of the business.

In the developing countries, too, attempts are afoot to establish,

promote, and fortify regulation as insurance business grows with the

economy's growth. The Indian insurance regulator too sh ould find it

useful to draw upon international experience, as it firms up its

agenda for sustainable development of the insurance market.

RNCOS’ report, “ Indian Insurance Industry Forecast (2007 -

2009)”, provides extensive research and objective analysis o f the
growing insurance industry, its product quality, and services in India.
This report helps to analyze the leading -edge opportunities critical to
the success of the insurance Industry in India. Detailed data and
analysis helps investors, financial serv ice providers, and global
banking players to navigate through the evolving insurance market in
India.

- Taking into account the changing socio -economic

demographics, rate of GDP growth, changing consumer behavior and
occurrences of natural calamities at r egular intervals, the Indian life
insurance market is expected to reach the value of around Rs 1683
Billion in the year 2009.

198
 - In 2006-07, pension premium contributed about 22.11% to
total premium income of insurers. Interestingly, the
figure in the fi rst nine mont hs to December 2005 was
25.22%.

- In the non -life segment, the established players control

65% of the market. So it is their monthly performance that
determines how the m arket as a whole would perform.

- In Motor Insurance Business, Public sector covers almost

68% of the market value whereas the private sector just
had 32% market share till September 2006.

- In Accident Insurance Business, private sector players

have almost 53% market share with ICICI Lombard as the
lead player. Public se ctor players constitute about 47%
market value with New India as the leading player
followed by United India. 37

5.4 Life Insurance industry in India and the role of Data

Analytics

It has been a natural tendency for the human being to hedge

against any unforeseen situation, and protect himself. This has been

going on since times immemorial, albeit in an unorganized fashion. If

this need to feel safe is so very innate to the human mind then there

must also be a business model which captures this as a opportunity.

37 LIC Bulletin, 2010

199
This is exactly what the insurance sector does. It feeds on the basic

human need to feel secure.

Amongst the various forms of insurance possible, Life

Insurance is the most predominant in India. The low life expectancy

rate and dismal pu blic healthcare system has only added to it being

embraced even by the not -so-rich in our society. The life insurance

industry in India has seen a high CAGR of 12% ever since the

opening up of this sector to private players in 1999. However with

penetratio n levels still low compared to other developed countries,

the market size is expected to double in the next 5 -6 years. A look at

some of the reports from veritable sources would do well to illustrate

the case.38

The Capgemini World Insurance Report of 2008 describes the

penetration of life insurance in India as ‘still woefully low’. India had

16% of the world population, but only 1.68% of the world life

insurance market in 2006. India is also far behind world averages in

terms of insurance penetration, and insurance density. A mere 20% of

the insurable population aged 20 to 60 years is currently covered by

life insurance. The average number of policies (life/ non -life) held by

per Indian consumer is just 1.33 as against 5.2 policies per consumer

in mature mar kets.

38 Solomon, Jay, 2003. “India”s elephantine economy may be poised to run,” The Wall Street Journal , 25
September, p. A17.

200
 As we can see from the numbers, the potential for expansion of

the market is huge especially with rising per capita income and a

growing middle class that is expected to constitute 32% of the total

population in 2010. The insurance penetration levels as a percentage

of GDP is expected to grow to 6% by 2012 from the current 4.8%

which would translate to a CAGR of 13% for the industry in the next

five years.

Insurance companies in the developed world, where insurance

has much higher penetration, realiz e the huge potential of insurance

industry in India. Add to it the fact that the possibility of Foreign

Direct Investment(FDI) cap in the sector rising up to 49% and we

have just another factor that holds promise of leading the growth in

this industry. A lthough currently FDI is capped at 26%, it’s soon

expected to be raised. This will result in increased investment by

foreign companies, especially by the foreign partners of private life

insurance companies. For instance, Max group is already in talks

with its partner, New York Life Insurance to chalk out a plan to

increase the latter’s stake. Foreign companies who are interested in

FDI have deeper pockets compared to the relatively small Indian

insurance companies. They bring with themselves the ‘best prac tices’

distilled through years of rich experience that they have had in this

industry. This augurs well for the insurance sector because the deep

201
pockets and ‘best practices’ of foreign partners can be dovetailed

with the awareness of the Indian psyche and marketing experience,

of their Indian counterparts to create a synergy which can increase

the reach of insurance in India making it more egalitarian.

But, as an increasing number of business houses enter the life

insurance industry, even survival is going to be difficult for many

companies. In the face of such stiff competition, organizations need to

make sure that they put their efforts in the right places like retaining

sales agents or minimizing lapsation rate. This is where data analytics

comes in, as it helps making informed, analytics driven decisions, in

these vital areas. 39

5.4.1 THE ROLE OF DATA ANA LYTICS

Insurers have an abundance of data across their organizations,

but most have not leveraged the full potential of this data in customer

acquisitio n, underwriting, claims servicing and customer

management. Insurers need to improve data collection, prioritize the

application of analytics across the customer life -cycle and build an

analytics capability to create a sustained culture of data driven

decision making.

39 Wade, Robert, 1985. “The market for public office: Why the Indian State is not better at development ,”
World Development , vol. 13, 4, April, pp. 467 -497.

202
 The insurance business though rich in data, but is mired in data
complexity. Even new companies less than 5 years old have a million
clients. Older and large companies e.g. LIC have over 130 million
policies. Insurance policies have a large am ount of data, and they are
complex in structure, with variations such as benefits, face amounts,
schemes, pricing, claims, multiple client relationships, medical
history and family history and underwriting. 40

Currently, use of statistics is largely limited to actuaries for

determination of the insurance premium rates. Statistics can have
wide applications in other departments of an insurance company.
For instance, the agency department can use statistical methods for
combating high agent attrition rates an d hiring productive agents.
Also, the marketing department can use statistics to identify target
customers for cross selling a new insurance policy. 41

Cross-selling

It costs five times more to acquire a new customer than to retain

an existing one. Encouragi ng existing customers to spend more not
only increases profit margins but also ensures that the relationship
with the customer is strengthened and therefore the customer is less
likely to stop paying premiums. In this process, existing customers
who are li kely to buy another product are identified and sales
campaigns are targeted to these customers thereby increasing the cost
40 Berman, Peter. "Rethinking Health Care Systems: Private Health Care Provision in Indi a." Harvard
School of Public Health Working Paper, November 1996, page no. 38.
41 Business Today. "The Monitory Group Study on Insurance I and II." March 22 and April 7, 2000, page n o.
322.

203
effectiveness of the campaigns. Let’s take the example, where the
Insurance Company knows which one thousand customers out of
their one lakh customers have teenaged children; they can target
these thousand customers with products tailored to teenaged
children. This was just one out of myriad such possibilities waiting to
be exploited by the sector.

5.4.2 INSURANCE MARKET - PRESENT

The insurance sector was opened up for private participation

four years ago. For years now, the private players are active in the

liberalized environment. The insurance market have witnessed

dynamic changes which includes presence of a fairly large number of

insurers both life and non -life segment. Most of the private insurance

companies have formed joint venture partnering well recognized

foreign players across the globe. 42

There are now 29 insurance companies operating in the Indian

market – 14 private life in surers, nine private non -life insurers and six

public sector companies. With many more joint ventures in the

offing, the insurance industry in India today stands at a crossroads as

competition intensifies and companies prepare survival strategies in

a detariffed scenario.

42 Dasgupta, Samik. "RSA, Iffco -Tokio yet to appoint actuaries," Economic Times, January 23, 2001.

204
 There is pressure from both within the country and outside on

the Government to increase the foreign direct investment (FDI) limit

from the current 26% to 49%, which would help JV partners to bring

in funds for expansion. There are opportu nities in the pensions sector

where regulations are being framed. Less than 10 % of Indians above

the age of 60 receive pensions. The IRDA has issued the first licence

for a standalone health company in the country as many more

players wait to enter. The h ealth insurance sector has tremendous

growth potential, and as it matures and new players enter, product

innovation and enhancement will increase. The deepening of the

health database over time will also allow players to develop and

price products for larg er segments of society.

State Insurers Continue To 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 thereby failing to make

any impact in the market.

Also as the private sector controls over 26.18% of the life

insurance market and over 26.53% of the non -life market, the public

sector companies still call the shots.

205
 The country’s largest life insurer, Life Insurance Corporation of
India (LIC), had a share of 74.82% in new business premium income
in November 2005. Similarly, the four public -sector non-life insurers
– New India Assurance, National Insurance, Oriental Insurance and
United India Insurance – had a combined market share of 73.47% as
of October 2005. ICICI Prudential Life Insurance Company continues
to lead the private sector with a 7.26% market share in terms of fresh
premium, whereas ICICI Lombard General Insurance Company is
the leader among the private non -life players with a 8.11% market
share. ICICI Lombard has focused on growing the market for general
insurance products and increasing penetration within existing
customers through product innovation and distribution. 43

Reaching Out To Customers No doubt, the customer profile in

the insurance industry is changing with the introduction of large
number of divergent intermediaries such as brokers, corporate
agents, and bancassur ance. The industry now deals with customers
who know what they want and when, and are more demanding in
terms of better service and speedier responses. With the industry all
set to move to a detariffed regime by 2007, there will be considerable
improvement in customer service levels, product innovation and
newer standards of underwriting. 44

43 Ibid
44 Kumari, Vaswati, "India Insurers Seek Perfect Partners." National Underwriters, March 5, 2001, 38-39.

206
 Intense Competition In a de-tariffed environment, competition

will manifest itself in prices, products, underwriting criteria,

innovative sales methods and creditworthin ess. Insurance companies

will vie with each other to capture market share through better

pricing and client segmentation.

Global Standards While the world is eyeing India for growth

and expansion, Indian companies are becoming increasingly world

class. Take the case of LIC, which has set its sight on becoming a

major global player following a Rs280 -crore investment from the

Indian government. The company now operates in Mauritius, Fiji, the

UK, Sri Lanka, Nepal and will soon start operations in Saudi Arabia .

It also plans to venture into the African and Asia -Pacific regions in

2006. The year 2005 was a testing phase for the general insurance

industry with a series of catastrophes hitting the Indian sub -

continent. 45

With life insurance premiums being just 2.5% of GDP and

general insurance premiums being 0.65% of GDP, the opportunities

in the Indian market place is immense. The next five years will be

45 Mitra, Sumit and Nayak, Shilpa. "Coming to Life." India Today, May 7, 2001.

207
challenging but those that can build scale and market share will

survive and prosper 46.

5.4.3 HEALTH INSURANCE

Health insurance expenditure in India is roughly 6% of GDP,

much higher than most other countries with the same level of

economic development. Of that, 4.7% is private and the rest is public.

What is even more striking is that 4.5% are out of pocket expendit ure

(Berman, 1996). There has been an almost total failure of the public

health care system in India. This creates an opportunity for the new

insurance companies. Thus, private insurance companies will be able

to sell health insurance to a vast number of f amilies who would like

to have health care cover but do not have it. 47

5.4.4 PENSION

The pension system in India is in its infancy. There are

generally three forms of plans: provident funds, gratuities and

pension funds. Most of the pension schemes are conf ined to

government employees (and some large companies). The vast

majority of workers are in the informal sector. As a result, most

46 Dreze Jean and Amartya Sen ( eds.) (1995), India: Economic Development and Social Opportunity,
Oxford University Press, page no. 22.
47 Patel, Freny. "Centre wants GIC to merge unviable outfits before recast." Business Standard, April 13,
2001.

208
workers do not have any retirement benefits to fall back on after

retirement. Total assets of all the pension plans in India amount to

less than USD 40 billion.

5.5 MARKET SHARE OF INDIAN INSURANCE INDUSTRY

The introduction of private players in the industry has added

value to the industry. The initiatives taken by the private players are

very competitive and have given immense competition to the on time

monopoly of the market LIC. Since the advent of the private players

in the market the industry has seen new and innovative steps taken

by the players in this sector. The new players have improved the

service quality of the insur ance. As a result LIC down the years have

seen the declining phase in its career. The market share was

distributed among the private players. Though LIC still holds the

75% of the insurance sector but the upcoming natures of these private

players are enoug h to give more competition to LIC in the near

future. LIC market share has decreased from 95% (2002 -03) to 81 %(

2004-05).The following companies has the rest of the market share of

the insurance industry. Table 5.4 shows the mane of the player in the

market. 48

48 Roy, Abhijit. "Pension fund business in India." The Hindu, July 16, 1997, p. 25.

209
 TABLE : 5.2
NAME OF THE INSURANCE COMPANY AND THE SHARE
HOLDING PATTEN

Name of the Insurance Company Shareholding

Agricultural Insurance Co Bank and Public Ins Co

Bajaj Allianz General Insurance Co. Ltd. Privately Held

Cholamandalam MS General In surance Co.

Privately Held
Ltd.

Export Credit Guarantee Company Public Sector

HDFC Chubb General Insurance Co. Ltd. Privately Held

ICICI Lombard General Insurance Co. Ltd. Privately Held

IFFCO-Tokio General Insurance Co. Ltd. Privately Held

National I nsurance Co. Ltd. Public Sector

New India Assurance Co. Ltd. Public Sector

Oriental Insurance Co. Ltd. Public Sector

Reliance General Insurance Co. Ltd. Privately Held

Royal Sundaram Alliance General Insurance

Privately Held
Co. Ltd.

Tata AIG General Insurance Co. Ltd. Privately Held

United India Insurance Co. Ltd. Public Sector

210
 There are a total of 13 life insurance companies operating in

India, of which one is a Public Sector Undertaking and the balance 12

are Private Sector Enterprises.

List of Companies are indicated below: -

TABLE : 5.3
NAME OF THE LIFE INSURANCE COMPANY AND THE SHARE
HOLDING PATTEN

Name of the company Nature of Holding

Allianz Bajaj Life Insurance Co Private

Aviva Life Insurance Private

Birla Sun Life Insurance Co Private

HDFC Standard Life Insurance Co Private

ICICI Prudential Life Insurance Co Private

ING Vysya Life Insurance Co. Private

Life Insurance Corporation of India Public

Max New York Life Insurance Co. Private

MetLife Insurance Co. Private

Om Kotak Mahindra L ife Insurance Private

Reliance insurance Private

SBI Life Insurance Co Private

TATA- AIG Life Insurance Company Private

211
 TABLE 5.4
NAME OF THE PLAYER MARKET SHARE (%)

Name of the Player Market share (%)

LIFE INSURANCE CORPORATION OF

82.3
INDIA

ICICI PRUDENTIAL 5.63

BIRLA SUN LIFE 2.56

BAJAJ ALLIANZ 2.03

SBI LIFE INSURANCE 1.80

HDFC STANDARD 1.36

TATA AIG 1.29

MAX NEW YARK 0.90

AVIVA 0.79

OM KOTAK MAHINDRA 0.51

ING VYSYA 0.37

MET LIFE 0.21

Source : www.rbi.org.in

5.6 PRESENT SCENARIO OF INS URANCE INDUSTRY

□ India with about 200 million middle class household

shows a huge untapped potential for players in the

insurance industry. Saturation of markets in many
212
 developed economies has made the Indian market even

more attractive for global insurance majors. The

insurance sector in India has come to a position of very

high potential and competitiveness in the market.

Indians, have always seen life insurance as a tax saving

device, are now suddenly turning to the private sector

that are providing them new pro ducts and variety for

their choice.

□ Consumers remain the most important centre of the

insurance sector. After the entry of the foreign players the

industry is seeing a lot of competition and thus

improvement of the customer service in the industry.

Computerisation of operations and up dating of

technology has become imperative in the current

scenario. Foreign players are bringing in international

best practices in service through use of latest technologies

□ The insurance agents still remain the main source

through which insurance products are sold. The concept

is very well established in the country like India but still

the increasing use of other sources is imperative. At

present the distribution channels that are available in the

market are listed below.

213
□ Customers have tre mendous choice from a large variety

of products from pure term (risk) insurance to unit -linked

investment products. Customers are offered unbundled

products with a variety of benefits as riders from which

they can choose. More customers are buying products

and services based on their true needs and not just

traditional moneyback policies, which is not considered

very appropriate for long -term protection and savings.

There is lots of saving and investment plans in the

market. However, there are still some ke y new products

yet to be introduced - e.g. health products.

□ The rural consumer is now exhibiting an increasing

propensity for insurance products. A research conducted

exhibited that the rural consumers are willing to dole out

anything between Rs 3,50 0 and Rs 2,900 as premium each

year. In the insurance the awareness level for life

insurance is the highest in rural India, but the consumers

are also aware about motor, accidents and cattle

insurance. In a study conducted by MART the results

showed that n early one third said that they had

purchased some kind of insurance with the maximum

penetration skewed in favor of life insurance. The study

214
also pointed out the private companies have huge task to

play in creating awareness and credibility among the

rural populace. The perceived benefits of buying a life

policy range from security of income bulk return in

future, daughter's marriage, children's education and

good return on savings, in that order, the study adds.

215
 TABLE : 5.5 Financial Results For 2009/2010 of General Insurance Companies

INR Millions

Fire Portfolio

National New Oriental United Bajaj Chola HDFC ICICI IFFCO Reliance Royal TATA Total
India India Allianz Mandalam CHUBB Lombard Tokio General Sundaram AIG

Gross Premium 5,195.30 10,676.90 5,355.80 6,313.20 1,202.90 254.50 3.60 2,639.00 1,428.90 463.60 505.30 784.50 34,823.50

Net Earned 3,482.80 7,941.93 3,291.37 4,211.69 264.07 33.75 0.20 238.78 243.21 90.02 134.04 82.27 20,013.73
Premium

Net Incurred 900.88 2,613.37 1,061.65 1,108.19 60.57 18.26 40.43 93.56 118.32 67.21 40.43 27.12 6,149.99
Claims

Operating 1,974.26 2,947.70 1,616.30 2,334.59 225.19 4.02 5.42 383.13 156.64 59.95 92.28 196.26 9,984.90
Profit/ Loss

Source : www.rbi.org.in

216
 TABLE : 5.6 Financial Results for 2009/2010 of Marine Insurance Companies

Marine Portfolio

National New Oriental United Bajaj Chola HDFC ICICI IFFCO Reliance Royal TATA Total
India India Allianz Mandalam CHUBB Lombard Tokio General Sundaram AIG

Gross 1,888.79 3,056.50 2,286.40 3,001.40 207.30 58.30 0.20 471.00 244.90 132.00 133.80 309.00 11,789.59
Premium

Net Earned 1,981.63 2,004.32 1,287.93 1,316.96 69.55 15.01 -0.01 64.86 101.86 18.05 69.15 151.92 7,081.23
Premium

Net 914.51 819.38 674.94 717.04 92.19 13.83 44.04 127.45 117.45 13.32 44.04 119.41 3,697.60
Incurred
Claims

Operating 1,121.28 1,096.89 596.44 460.13 -33.57 -8.17 -0.25 -70.24 -43.80 3.65 5.87 -20.58 3,107.65
Profit/ Loss

Source : www.rbi.org.in

217
 TABLE : 5.7 Financial Results for 2009/2010 of Insurance Companies

Miscellaneous P ortfolio

National New Oriental United Bajaj Chola HDFC ICICI IFFCO Reliance Royal TATA Total
India India Allianz Mandalam CHUBB Lombard Tokio General Sundaram AIG

Gross Premium 26,915.60 35,481.30 21,355.20 21,320.10 3,355.10 657.70 1,125.70 2,209.90 1,548.60 1,015.00 1,938.50 2,341.70 119,264.40

Net Earned Premium 18,413.69 25,948.30 15,145.27 15,837.66 1972.75 189.52 398.00 487.17 657.21 155.14 1119 1201.96 81,525.67

Net Incurred Claims 19,283.60 23,703.04 14,139.88 16,596.45 1,353.30 176.8 811.58 479.53 492.75 156.88 811.58 699.31 78,704.70

Operating Profit/ Loss -3,327.23 -2,959.21 762.88 -1,141.40 31.26 -168.01 -295.75 -43.01 -55.98 -60.50 -99.58 -161.47 7,518.00

Source : www.rbi.org.in

218
 TABLE : 5.8 Financial Results for 2009/2010 of Total portfolio

Total

National New Oriental United Bajaj Chola HDFC ICICI IFFCO Reliance Royal TATA Total
India India Allianz Mandalam CHUBB Lombard Tokio General Sundaram AIG

Gross Premium 33,999.69 49,214.70 28,997.40 30,634.70 4,765.30 970.50 1,129.50 5,319.90 3,222.40 1,610.60 2,577.60 3,435.20 165,877.49

Net Earned Premium 23,878.12 35,894.55 19,724.57 21,366.31 2,306.37 238.28 397.79 790.81 1,002.28 263.21 1,322.19 1,436.15 108,620.63

Net Incurred Claims 21,098.99 27,135.79 15,876.47 18,421.68 1,506.06 208.89 896.05 700.54 728.52 237.41 896.05 845.84 88,552.29

Operating Profit/ Loss -231.69 1,085.38 2,975.62 1,653.32 222.88 -172.16 -301.42 269.88 56.86 3.10 -1.43 14.21 5,574.55

Source : www.rbi.org.in

219
 CHART : 5.1

Gross and Net Premium in India for last 10 years

It has been observed from the above diagram that as soon as economic reforms has been introduced Gross

Direct Premium is increasing rapidly compare to Net Premium, which reflects private sector insurance is being

affected due to market com petition.

220
 TABLE : 5.9 Net Worth Movement for the Past Three Years

Net Worth Movement For The Past Three Years

INR Millions

National New Oriental United Bajaj Chola HDFC ICICI IFFCO Reliance Royal TATA
India India Allianz Mandalam CHUBB Lombard Tokio General Sundaram AIG

2001-02 9,639.20 31,893.90 6,728.00 13,018.80 1,010.00 1,094.00 1,000.00 1,020.00 1,300.00 1,093.00

2002-03 10,721.70 34,040.00 8,336.50 14,446.70 1,313.43 1,050.00 1,002.20 1,095.98 1,068.93 1,235.83 1,297.93 1,234.97

2003-04 8,851.90 39,434.40 11,219.00 13,018.80 1,094.75 1,419.60 1,193.95 2,259.32 1,104.82 1,325.73 1,298.96 1,234.97

Source : www.rbi.org.in

221
5.7 APPLICATION OF INFORMATION TECHNOLOGY IN
INSURANCE SECTOR

There is a evolutionary change in the technology that ha s

revolutionized the entire insurance sector. Insurance industry is a data -rich

industry, and thus, there is a need to use the data for trend analysis and

personalization. With increased competition among insurers, service has

become a key issue. Moreover, customers are getting increasingly

sophisticated and tech -savvy. People today don’t want to accept the

current value propositions, they want personalized interactions and they

look for more and more features and add ones and better service The

insurance companies today must meet the need of the hour for more and

more personalized approach for handling the customer. Today managing

the customer intelligently is very critical for the insurer especially in the

very competitive environment. Companies need to ap ply different set of

rules and treatment strategies to different customer segments. However, to

personalize interactions, insurers are required to capture customer

information in an integrated system.

With the explosion of Website and greater access to dir ect product or

policy information, there is a need to developing better techniques to give

customers a truly personalized experience. Personalization helps

organizations to reach their customers with more impact and to generate

new revenue through cross se lling and up selling activities. To ensure that

222
the customers are receiving personalized information, many organizations

are incorporating knowledge database -repositories of content that typically

include a search engine and lets the customers locate the a ll document and

information related to their queries of request for services. Customers can

hereby use the knowledge database to mange their products or the

company information and invoices, claim records, and histories of the

service inquiry. These produc ts also may be able to learn from the

customer’s previous knowledge database and to use their information

when determining the relevance to the customers search request.

223
 TABLE 5.10 : INVESTMENTS BY LIC

(` crore)

Instrument-wise
Sector-wise
of which Total (2
Year (end-March)
Stock Exchange to 5)
Public Private Joint Co-operative Loans
Securities

1 2 3 4 5 6 7 8

1980 3915.5 770.1 0.0 602.1 3113.4 2173.6 5287.7

1981 4707.8 647.2 0.0 665.5 3591.3 2725.6 6020.5

1982 5410.7 698.7 32.0 753.0 4040.6 2612.0 6894.4

1983 6189.7 787.4 32.7 825.2 7835.0

1984 7020.8 891.4 40.1 905.3 8857.6

1985 7919.5 1010.6 51.2 972.9 9954.2

1986 9063.8 1121.3 68.0 1036.8 6822.8 4474.1 11289.9

1987 10259.3 1408.1 86.9 1058.6 7929.6 4865.0 12812.9

1988 11837.3 1624.8 88.4 1161.7 9230.9 5412.0 14712.2

1989 14032.4 1973.1 97.1 1240.1 10932.3 5055.5 17342.7

1990 16404.3 2640.7 125.5 1333.2 12918.6 7257.5 20503.7

1991 19980.2 3310.0 165.2 1444.3 15871.2 7416.6 24899.7

1992 24425.4 4239.5 174.9 1562.6 19056.8 10942.3 30402.4

1993 28983.2 5397.0 284.3 1657.6 23082.5 11585.4 36322.1

224
1994 36246.5 5894.4 304.6 1716.1 29536.3 12876.3 44161.6

1995 44318.9 7017.2 350.3 1793.1 37420.1 14169.4 53479.5

1996 54003.4 8814.4 380.3 1858.8 47086.1 18085.6 65056.9

1997 65917.4 9588.5 490.3 1941.8 58850.8 16750.7 77938.0

1998 79235.7 11834.3 500.0 2030.3 72537.0 18489.9 93600.3

1999 96410.5 15048.4 549.3 2094.5 90823.8 26109.7 114102.7

2000 117059.0 19268.4 575.5 2129.3 114032.3 28925.5 139032.2

2001 141256.2 22779.5 799.7 2168.4 140106.0 32155.4 167003.8

2002 180574.1 23707.8 792.8 2128.6 178943.3 34913.2 207203.3

2003 219596.7 29406.8 684.5 2082.3 222449.3 27539.8 251770.3

2004 271778.5 51923.6 959.6 2079.5 297566.0 31800.4 326741.2

2005 322021.8 68484.5 1270.2 1408.2 355634.7 37529.5 393184.6

2006 378807.2 105148.1 1915.5 1356.5 450557.2 37135.3 487227.2

2007 433810.3 84294.0 75.2 3555.1 480426.8 41307.8 521734.6

2008 503388.4 128467.8 73.7 3817.6 590466.6 45281.0 635747.5

2009 572050.3 187140.8 71.7 3628.9 715710.4 47181.4 762891.7

2010 678374.5 236134.7 70.9 3336.5 872061.7 45854.9 917916.5

2011 775992.5 265798.3 82.1 3666.6 1001755.3 43784.2 1045539.4

Note : 1. Data for 2011 are provisional.

2. Instrument -wise loans for the years 2003 to 2011 exclude policy loans to HPF, Treasury bills and Commercial papers.
Source : Life Insurance Corporation of India.

225
TABLE 5.11 : DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION - INSURED DEPOSITS

(Number in million; Amount in ` crore)

Year Number of fully Total number of Total amount of Total amount of

protected accounts accounts insured deposits assessable deposits

1 2 3 4 5

1973 40 42 5852 9152

1974 46 48 6801 10624

1975 58 60 8832 13494

1976 72 73 11827 16588

1977 84 86 14155 19892

1978 92 93 15369 21659

1979 107 109 18582 26743

1980 127 129 24234 32570

1981 137 138 25859 35004

1982 158 160 31774 42360

1983 179 182 37746 50797

226
1984 200 203 46340 61880

1985 215 224 56211 76517

1986 232 236 62878 86214

1987 252 257 75511 103044

1988-89 271 278 90192 126864

1989-90 306 314 101682 140746

1990-91 298 309 109316 156892

1991-92 317 329 127925 186307

1992-93 340 354 164527 244375

1993-94 350 353 168405 249034

1994-95 496 499 266747 364058

1995-96 482 487 295575 392072

1996-97 427 435 337671 450674

1997-98 371 411 370531 492280

1998-99 454 464 439609 609962

1999-00 430 442 498558 704068

227
2000-01 432 446 572434 806260

2001-02 464 482 674051 968752

2002-03 578 600 828885 1213163

2003-04 519 544 870940 1318268

2004-05 620 650 991365 1619815

2005-06 506 537 1052988 1790919

2006-07 683 717 1372597 2344351

2007-08 962 1039 1805081 2984800

2008-09 1204 1349 1908951 3398565

2009-10 1267 1424 1682397® 4587967

2010-11 977@ 1052@ 1735800® 4952427®

Note : As on the last Friday of September 1972 throug h September 1979; as on the last Friday of
June 1980 through June 2003; as on the last working day of September 2004 through September
2010.
@ : Data as per new reporting format.
Also see Notes on Tables.
Source : Deposit Insurance and Credit Guarantee Co rporation. , year 2009, page no. 64

228
 Table 5.12 : Deposit Insurance and Credit Guarantee Corporation - Liabilities and Assets ( Deposit Insurance Fund )

(` crore)

Year Fund Surplus Inve- Claims Estimated Insured Other Total Bala Deficit Invest Inte Other
Balance stment Intimated and Liability Depo Liabili - Liabili nces Bala ments in rest Assets
Reser- Claims in Respect sits ties ties/ with nce Central Accr
ves Admitted but of Claims Remai Assets RBI Govern ued on
not Paid Intimated ning ment Invest-
But not Unclai Secu ment
Admitted med rities
(at cost)
1 2 3 4 5 6 7 8 9 10 11 12 13 14

1989-90 0 272 76 0 10 0 307 664 0 0 612 22 30

1990-91 65 271 76 0 18 355 787 0 0 678 24 85

1991-92 123 283 84 0 51 394 936 0 0 741 27 168

1992-93 89 222 162 0 15 622 1111 0 0 893 32 186

1993-94 80 125 162 0 8 1032 1408 0 0 1139 41 228

1994-95 169 2 184 0 16 1386 1758 0 0 1435 62 261

1995-96 203 2 261 0 7 1721 2195 0 0 1911 79 205

1996-97 298 0 261 0 45 2108 2713 0 0 2389 74 250

1997-98 249 1773 261 0 22 1042 3348 0 0 2953 133 262

1998-99 353 2754 261 0 25 2 706 4101 0 0 3355 119 627

1999-00 434 2876 261 0 639 3 787 5000 0 0 4171 142 687

2000-01 501 3205 261 0 1156 3 623 5749 0 0 4874 158 717

2001-02 563 3687 261 0 1187 3 899 6600 0 0 5453 166 981

229
2002-03 831 4683 261 0 517 6 1285 7584 0 0 5999 171 1413

2003-04 871 5037 259 0 1236 9 1328 8740 0 0 7079 192 1469

2004-05 875 6942 475 0 1789 54 1662 11797 0 0 9363 235 2199

2005-06 1026 8077 641 0 1260 41 3056 14102 0 0 10284 282 3535

2006-07 1211 9767 954 0 616 43 4417 17008 1 0 12194 322 4491

2007-08 1553 11809 1050 0 488 48 5905 20853 0 0 14399 348 6106

2008-09 1817 14339 929 0 1075 49 7213 25515 0 0 17268 395 7852

2009-10 3275 16877 1661 156 764 55 6893 29682 0 0 21532 425 7725

2010-11 3774 20930 1896 151 562 60 8924 36296 1 0 26582 492 9222

Note : Data on liabilities and assets of DICGC relate to end -December for 1988 -89 and from 1989 -90 onwards, they refer to the financial
year (April -March).
Also see Notes on Tables.
Source : Deposit Insuranc e and Credit Guarantee Corporation.

230
 Table 5.13 : Deposit Insurance and Credit Guarantee Corporation - Liabilities and Assets ( Credit Guarantee Fund )

(Rs. crore)

Invest
Claims
Estimated ments in
Invest- Intimated Guran- teed Total Interest
Liability in Other Central
Surplus ment and Claims Credits Liabi- Balances Deficit Accrued Other
Year Fund Respect of Liabi- Govern-
Balance Re Admitted Remai-ning lities/ with RBI Balance on Invest- Assets
Claims intimated lities ent
serves but not Un-claimed Assets ment
but not Admitted Securities
paid
(at cost)

1 2 3 4 5 6 7 8 9 10 11 12 13 14

1989-90 406 0 61 0 286 0 7 760 2 0 464 14 280

1990-91 495 0 61 0 356 0 97 1009 6 0 665 21 317

1991-92 751 0 67 1 377 0 126 1322 4 0 876 26 416

1992-93 907 0 67 2 700 0 2 1678 3 0 1005 30 640

1993-94 1521 0 67 20 742 0 21 2371 4 0 1322 40 1005

1994-95 1793 0 67 20 1017 0 47 2944 1 0 1537 42 1364

1995-96 1775 0 104 13 1712 0 12 3616 4 0 1843 52 1717

1996-97 2926 0 104 308 2705 0 32 6075 3 1312 2518 93 2149

1997-98 679 0 104 372 1922 0 677 3754 1 0 2866 101 786

1998-99 548 210 104 128 1066 0 1106 3162 1 0 1679 46 1436

1999-00 48 1140 104 25 127 0 1771 3215 137 0 1039 32 2007

2000-01 0 1134 104 0 4 0 1284 2526 1 0 1162 37 1326

2001-02 0 1262 104 0 0 0 1257 2623 0 0 1186 36 1400

231
2002-03 0 1393 104 0 0 0 909 2406 0 0 1479 45 882

2003-04 0 1510 106 0 0 0 987 2603 0 0 1680 48 875

2004-05 0 250 103 0 0 0 1035 1388 0 0 434 18 936

2005-06 0 345 28 0 0 0 986 1365 0 0 394 15 956

2006-07 0 349 50 0 0 0 1009 1408 0 0 437 16 955

2007-08 0 367 58 0 0 0 1019 1444 0 0 458 15 970

2008-09 0 385 58 0 0 0 1046 1489 0 0 591 16 882

2009-10 0 298 60 0 0 0 200 558 0 0 337 10 211

2010-11 0 310 68 0 0 0 206 584 0 0 359 10 215

Note : Data on liabilities and assets of DICGC relate to end -December for 1988-89 and from 1989 -90 onwards, they refer to the financial year (April -March).
Also see Notes on Tables.
Source : Deposit Insurance and Credit Guarantee Corporation , page no. 32.

232
 Table 5.14 : Deposit Insurance and Credit Guarantee Corpor ation - Liabilities and Assets ( General Fund )

(` crore)

Cash in Investment in
Capital Current Total Interest
General Investment Other hand and Government Other
Year provided liabilities and liabilities/ accured on
reserves reserves reserves balances securities (at assets
by RBI provisions assets investment
with RBI cost)

1 2 3 4 5 6 7 8 9 10 11

1989-90 50 18 12 0 3 84 0 75 3 6

1990-91 50 17 12 0 8 87 0 78 3 6

1991-92 50 18 13 0 5 86 0 77 3 6

1992-93 50 14 16 0 7 87 0 76 3 8

1993-94 50 12 16 0 7 85 0 72 3 10

1994-95 50 9 16 0 9 84 0 70 3 11

1995-96 50 14 16 0 10 90 0 77 2 11

1996-97 50 15 16 0 9 90 0 76 2 12

1997-98 50 17 16 0 9 92 0 79 2 11

1998-99 50 17 16 0 9 93 0 77 2 14

1999-00 50 17 16 0 10 93 0 81 2 10

2000-01 50 18 16 0 3 87 0 77 2 8

2001-02 50 20 16 0 5 91 0 88 2 1

2002-03 50 22 16 0 5 93 0 88 2 3

2003-04 50 24 16 0 7 97 0 91 2 4

233
 2004-05 50 26 17 0 8 101 0 93 2 6

2005-06 50 74 19 0 8 151 0 140 3 8

2006-07 50 70 24 0 13 156 0 139 4 13

2007-08 50 164 30 0 14 257 0 214 6 38

2008-09 50 168 25 0 20 263 0 215 5 43

2009-10 50 428 79 0 8 564 0 521 12 31

2010-11 50 438 82 0 15 585 0 531 12 41

Note : Data on liabilities and assets of DICGC relate to end -December for 1988 -89 and from 1989 -90 onwards, they refer to the financial year
(April -March).
Source : Deposit Insurance and Credit Guarantee Corporation , page no. 38.

The all above tables represe nt sequential growth of Indian insurance industry as well its growth has also been calculated on

the behalo of statistical tool SPSS analys es by which CAGR has been calculated .

234