Life Insurance Marketing in India (C) The Changing Product & Pricing Norms

BACKGROUND NOTE Contd..

Though one of LIC's basic objectives was to ‘provide insurance cover to all Indians,'insurance penetration in India was considered to be very low. According to reports, only 65 million people were covered by insurance. In 1999, R N Jha, LIC's former Executive Director, commented in his book, ‘Insurance in India,'“Insurance coverage has been extended only to about 25% of the insurable population in 40 years,” indicating the huge uncovered market potential in the country.

It was reported that the per capita insurance premium^[2]in developed countries was much higher than that in India. In 1999, the per capita insurance premium in India was only $8, while it was $4,800 in Japan, $1000 in the Republic of Korea, $887 in Singapore, $823 in Hong Kong and $144 in Malaysia.

Also, in terms of gross insurance premium, India's share in the global market was only 0.3%, though it ranked second in the world in terms of population. The corresponding figures in 1999 was 31% for Japan, 25% for the European Union, 2.3% for South Africa and 1.7% for Canada. Further, in 2001, while the ratio of insurance premium and the Gross Domestic Product (GDP)^[3] was 9% for UK and Japan, and 5% for the US, it was only 1.9% for India.

Attracted by the potential of the insurance market in India, many private players entered it after the Insurance Bill was passed in late 2000. A majority of these were collaborations between Indian companies and leading multinational insurance/financial services company (Refer
to Table I).

TABLE I
PRIVATE PLAYERS IN THE INDIAN INSURANCE MARKET

COMPANY	INDIAN PARTNER	FOREIGN INSURER	AREA
Birla Sun Life	Aditya Birla Group	Sun Life, Canada	Life
OM Kotak	Kotak Mahindra Finance	Old Mutual, South Africa	Life
HDFC-Standard Life	HDFC	Standard Life, UK	Life
Royal Sundaram	Sundaram Finance	Royal Sun, UK	Life and Non-Life
ICICI-Prudential	ICICI	Prudential, UK	Life
Max New York Life	Max India	New York Life, USA	Life
Tata-AIG	Tata Group	AIG, USA	Life and Non-Life
ING Vysya	Vysya Bank	ING Insurance, Netherlands	Life
Aviva	Dabur	CGU Life, UK	Life
MetLife India	Jammu & Kashmir Bank	MetLife, USA	Life
Bajaj Allianz	Bajaj Auto	Allianz	Life & Non-Life
AMP Sanmar	Sanmar Group	AMP, Australia	Life
SBI Life Insurance	SBI	Cardiff, France	Life

Source: www.knowledgedigest.com

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TABLE II
CUSTOMER SEGMENTS IN INSURANCE INDUSTRY

PRODUCT INNOVATIONS

LIC REJIGS ITS PORTFOLIO

FUTURE IMPLICATIONS

QUESTIONS FOR DISCUSSION

EXHIBIT I DIFFERENT TYPES OF LIFE INSURANCE POLICIES

EXHIBIT II PRODUCTS FOR INDIVIDUALS OFFERED BY DIFFERENT COMPANIES

EXHIBIT III COMPARING ENDOWMENT POLICIES

EXHIBIT IV COMPARING MONEY BACK POLICIES

EXHIBIT V COMPARING TERM LIFE POLICIES

ADDITIONAL READINGS & REFERENCES

^[2] Total Insurance Premium of a country divided by its total population.

^[3] GDP is defined as the value, at current market prices, of the total final output produced inside a country during a given year.