Globlization And Its Impact Of guarnatee business In India

Max Bupa Health Insurance Jobs - Globlization And Its Impact Of guarnatee business In India

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Introduction

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The word "Fear" has only four alphabets like love but both of them have very separate e meaning. Whatever man (malor female) does for the love of their families all the time starts with the background of fear. Commonly so many times we have been asking our selves that, what will happen if we were not there, but we keep on asking rather then doing something for it. Time is precious, it never stops for any one and we are living in the world of uncertainty; the uncertainty of job, the uncertainty of money, the uncertainty of property and like this the story goes continuous for the whole life of a man.

A successful guarnatee sector is of vital importance to every contemporary economy. Firstly because it encourages the habit of saving, secondly because it provides a protection net to rural and urban enterprises and productive individuals. And maybe most importantly it generates long- term imperceptible funds for infrastructure building. The nature of the guarnatee company is such that the cash inflow of guarnatee fellowships is constant while the payout is deferred and contingency related.

This characteristic highlight of their company makes guarnatee fellowships the biggest investors in long-gestation infrastructure amelioration projects in all industrialized and aspiring nations. This is the most compelling intuit why incommunicable sector (and foreign) companies, which will spread the guarnatee habit in the societal and consumer interest are urgently required in this vital sector of the economy. Occasion up of guarnatee to incommunicable sector including foreign participation has resulted into varied opportunities and challenges in India.

Life guarnatee Market

The Life guarnatee market in India is an underdeveloped market that was only tapped by the state owned Lic till the entry of incommunicable insurers. The penetration of life guarnatee products was 19 percent of the total 400 million of the insurable population. The state owned Lic sold guarnatee as a tax instrument, not as a stock giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the incommunicable insurers the rules of the game have changed.

The 12 incommunicable insurers in the life guarnatee market have already grabbed nearly 9 percent of the market in terms of superior income. The new company superior of the 12 incommunicable players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, with regard to state owned Lic's new superior company has fallen.

Innovative products, smart marketing and aggressive distribution. That's the triple whammy composition that has enabled fledgling incommunicable guarnatee fellowships to sign up Indian customers faster than Whatever ever expected. Indians, who have all the time seen life guarnatee as a tax saving device, are now suddenly turning to the incommunicable sector and snapping up the new innovative products on offer.

The growing popularity of the incommunicable insurers is evidenced in other ways. They are coining money in new niches that they have introduced. The state owned fellowships still dominate segments like endowments and money back policies. But in the annuity or pension products business, the incommunicable insurers have already wrested over 33 percent of the market. And in the favorite unit-linked guarnatee schemes they have a virtual monopoly, with over 90 percent of the customers.
The incommunicable insurers also seem to be scoring big in other ways- they are persuading citizen to take out bigger policies. For instance, the median size of a life guarnatee course before privatization was around Rs 50,000. That has risen to about Rs 80,000. But the incommunicable insurers are ahead in this game and the median size of their policies is around Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the commerce average.

Buoyed by their quicker than staggering success, nearly all incommunicable insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of incommunicable insurers is already paying rich dividends. But a rejuvenated Lic is also trying to fight back to woo new customers.

Insurance Today

In 1993, Malhotra Committee, headed by previous Finance Secretary and Rbi Governor R. N. Malhotra, was formed to evaluate the Indian guarnatee commerce and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.

With the setup of guarnatee Regulatory amelioration Authority (Irda) the reforms started in the guarnatee sector. It has became important as if we assess our guarnatee penetration and per capita superior we are much behind then the rest of the world. The table above gives the statistics for the year 2000.

With the staggering increase in per capita wage to 6% for the next 10 year and with the improvement in the awareness levels the demand for guarnatee is staggering to grow.
As per an independent consultancy company, Monitor Group has estimated a increase form Rs. 218 Billion to Rs. 1003 Billion by 2008. The estimations seems achievable as the execution of 13 life guarnatee players in India for the year 2002-2003 (up to October, based on the first year premium) is Rs. 66.683 million being Lic the biggest contributor with Rs. 59,187 million. As of now Lic has 2050 branches in 7 zones with strong team of 5,60,000 agents.

Impact Of Globalisation

While nationalized guarnatee fellowships have done a commendable job in extending the volume of the business, Occasion up guarnatee sector to incommunicable players was a necessity in the context of globalization of financial sector. If original infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc., have important incommunicable sector presence, chronic a state of monopoly in provision of guarnatee was indefensible and therefore, the globalization of guarnatee has been done as discussed earlier. Its impact has to be seen in the form of creating varied opportunities and challenges.

The introduction of incommunicable players in the commerce has added colours to the dull industry. The initiatives taken by the incommunicable players are very competitive and have given immense competition to the on time monopoly of the market Lic. Since the arrival of the incommunicable players in the market the commerce has seen new and innovative steps taken by the players in the sector. The new players have improved the service capability of the insurance. As a effect Lic down the years have seen the declining in its career. The market share was distributed among the incommunicable players. Though Lic still holds 75% of the guarnatee sector the upcoming nature of these incommunicable players are adequate 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 company holds the rest of the market share of the guarnatee industry.

Table - 1

Impact Of Globalisation

Name Of The Player market Share (%)

Lic 82.3

Icici Prudential 5.63

Birla Sun Life 2.56

Baja Allianz 2.03

Sbi Life 1.80

Hdfc Standard 1.36

Tata Aig 1.29

Max New York 0.90

Aviva 0.79

Om Kotak Mahindra 0.51

Ing Vyasa 0.37

Amp Sanmar 0.26

Metlife 0.21

Present Scenario Of Globalisation

In a tough battle to enlarge market shares the incommunicable sector life guarnatee commerce consisting of 14 life guarnatee fellowships at 26% have lost 3% of market share to the state owned Life guarnatee Corporation(Lic) in the domestic life guarnatee commerce in 2006-07. According to the figures released by guarnatee Regulatory & amelioration Authority, the total superior of these 14 fellowships have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.

Lic with a total superior mobilisation of Rs 55,934 crore has been able to support a market share of 74.26 % while the reporting period. In total the life guarnatee commerce in first year superior has grown by 110% to Rs 75, 406 crore while 2006-07. The 2006-07 execution has thrown a few surprises in the ranking among the incommunicable sector life guarnatee companies. New entrants like reliance Life and Sbi Life had shown a huge increase of over 381% and 210% respectively while the year. reliance Life which has become one of the top five fellowships ended the year with a superior of Rs 930 crore while the year.

Though Icici Prudential Life guarnatee remained as the No 1 incommunicable sector life guarnatee company while the year. Bajaj Allianz overtook Icici Prudential in terms of monthly market share in March, for the first time ever. Bajaj's market share among incommunicable players in non-single superior for March stood at 29.1% vs. Icici Prudential's 23.8%. Bajaj gained 4.6 percentage point market share among incommunicable sector players for Fy07.

Among other incommunicable players, Sbi Life and reliance Life prolonged to do well, each gaining 4% market share in Fy07. Sbi Life's increase was driven by increasing contribution from Ulip premiums. an additional one notable developments of the 2006-07 execution has been the expansion of sell markets by the life guarnatee comapnies. Bajaj Alliannz Life guarnatee has added 20 lakh policies while Icici Prudential has vast over 19 lakh policies while the year.

With the largest whole of life guarnatee policies in force in the world, guarnatee happens to be a mega Occasion in India. It's a company growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the country's Gdp. Gross superior collection is nearly 2 per cent of Gdp and funds available with Lic for investments are 8 per cent of Gdp.

Yet, nearly 80 per cent of Indian citizen is without life guarnatee cover while health guarnatee and non-life guarnatee continues to be below international standards. And this part of the citizen is also subject to weak group protection and pension systems with hardly any old age wage security. This itself is an indicator that increase possible for the guarnatee sector is immense.

A well-developed and evolved guarnatee sector is needed for economic amelioration as it provides long term funds for infrastructure amelioration and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would wish investments of the order of one trillion Us dollar. The guarnatee sector, to some extent, can enable investments in infrastructure amelioration to support economic increase of the country.

Insurance is a federal subject in India. There are two legislations that govern the sector- The guarnatee Act- 1938 and the Irda Act- 1999. The guarnatee sector in India has become a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian guarnatee sector reveals the 360 degree turn witnessed over a duration of practically two centuries.

Important milestones in the life guarnatee company in India

1912: The Indian Life guarnatee fellowships Act enacted as the first statute to regulate the life guarnatee business.

1928: The Indian guarnatee fellowships Act enacted to enable the government to gain statistical data about both life and non-life guarnatee businesses.

1938: Earlier legislation consolidated and amended to by the guarnatee Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. Lic formed by an Act of Parliament- Lic Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

In a tough battle to enlarge market shares the incommunicable sector life guarnatee commerce consisting 14 life guarnatee fellowships at 26% have lost 3% of market share to the state owned Life guarnatee Corporation(Lic) in the domestic life guarnatee commerce in 2006-07. According to the figures released by guarnatee Regulatory & amelioration Authority the total superior these 14 fellowships have shot up by 90% to Rs 19,471.83 crore in 2006-07 from Rs 10, 252 crore.

Lic with a total superior mobilisation of Rs 55,934 crore has been able support a market share of 74.26 % while the reporting period. In total the life guarnatee commerce in first year superior has grown by 110% to Rs 75, 406 crore while 2006-07. The 2006-07 execution has thrown a few surprises in the ranking among the incommunicable sector life guarnatee companies. New entrants like reliance Life and Sbi Life had shown a huge increase of over 381% and 210% respectively while the year. reliance Life which has become one of the top five fellowships ended the year with a superior of Rs 930 crore while the year.

Though Icici Prudential Life guarnatee remained as the No 1 incommunicable sector life guarnatee company while the year Bajaj Allianz overtook Icici Prudential in terms of monthly market share in March, for the first time ever. Bajaj's market share among incommunicable players in non-single superior for March stood at 29.1% vs. Icici Prudential's 23.8%. Bajaj gained 4.6 percentage point market share among incommunicable sector players for Fy07.

Among other incommunicable players, Sbi Life and reliance Life prolonged to do well, each gaining 4% market share in Fy07. Sbi Life's increase was driven by increasing contribution from Ulip premiums. an additional one notable amelioration of the 2006-07 execution has been the expansion of sell markets by the life guarnatee companies. Bajaj Alliannz Life guarnatee has added 20 lakh policies while Icici Prudential has vast over 19 lakh policies while the year.

Opportunites

- A state monopoly has wee incentive to innovative or offers a wide range of products. It can be seen by a lack of inescapable products from Lic's folder and lack of farranging risk categorization in several Gic products such as health insurance. More competition in this company will spur firms to offer several new products and more complicated and farranging risk categorization.

- It would also effect in best buyer services and help enhance the collection and price of guarnatee products.

- The entry of new players would speed up the spread of both life and normal insurance. Spread of guarnatee will be measured in terms of guarnatee penetration and portion of density.

- With the entry of incommunicable players, it is staggering that guarnatee company practically 400 billion rupees per year now, more than 20 per cent per year even leaving aside the relatively under industrialized sectors of health insurance, pen More importantly, it will also ensure a great mobalisation of funds that can be utilized for purpose of infrastructure amelioration that was a factor thought about for globalisation of insurance.

- More importantly, it will also ensure a great moblisation of funds that can be utilized for purpose of infrastructure amelioration that was a factor thought about for globalisation of insurance.

- With allowing of keeping of equity shares by foreign company either itself or straight through its subsidiary company or nominee not exceeding 26% of paid up capital of Indian partners will be operated resulting into supplementing domestic savings and increasing economic enlarge of nation. Agreements of varied ventures have already been made to be discussed later on in this paper.

- It has been estimated that guarnatee sector increase more than 3 times the increase of economy in India. So company or domestic firms will attempt to invest in guarnatee sector. Moreover, increase of guarnatee company in India is 13 times the increase guarnatee in industrialized countries. So it is natural, that foreign fellowships would be fostering a very strong desire to invest something in Indian guarnatee business.

- Most prominent not the least large employment opportunities will be created in the field of guarnatee which is burning question of the gift day today issues.

Challenges Before The Industry

New age fellowships have started their company as discussed earlier. Some of these fellowships have been able to float 3 or 4 products only and some have targeted to perform the level of 8 or 10 products. At present, these fellowships are not in a position to pose any challenge to Lic and all other four fellowships operating in normal guarnatee sector, but if we see the capability and standards of the products which they issued, they can unmistakably be a challenge in future. Because the challenge in the whole environment caused by globalisation and liberalization the commerce is facing the following challenges.

- The existing insurer, Lic and Gic, have created a large group of dissatisfied customers due to the poor capability of service. Hence there will be shift of large whole of customers from Lic and Gic to the incommunicable insurers.

- Lic may face question of surrender of a large whole of policies, as new insurers will woo them by offer of innovative products at lower prices.

- The corporate clients under group schemes and wage savings schemes may shift their loyalty from Lic to the incommunicable insurers.

- There is a likelihood of exit of young dynamic managers from Lic to the incommunicable insurer, as they will get higher package of remuneration.

- Lic has overstaffing and with the introduction of full computerization, a large whole of the employees will be surplus. Any way they cannot be retrenched. Hence the operating costs of Lic will not be reduced. This will be a disadvantage in the competitive market, as the new insurers will control with lean office and high technology to cut the operating costs.

- Gic and its four subsidiary fellowships are going to face more challenges, because their supervision expenses are very high due to surplus staff. They can't cut their whole due to service rules.

- Management of claims will put strain on the financial resources, Gic and its subsidiaries since it is not up the mark.

- Lic has more than to 60 products and Glc has more than 180 products in their kitty, which are outdated in the gift context as they are not suitable to the changing needs of the customers. Not only that they are not competent adequate to unblemished with the new products offered by foreign fellowships in the market.

- Reaching the consumer expectations on par with foreign fellowships such as best yield and much improved capability of service particularly in the area of village of claims, issue of new policies, replacement of the policies and revival of policies in the liberalized market is very difficult to Lic and Gic.

- Intense competition from new insurers in winning the consumers by multi-distribution channels, which will include agents, brokers, corporate intermediaries, bank branches, affinity groups and direct marketing straight through telesales and interest.

- The market very soon will be flooded by a large whole of products by fairly large whole of insurers operating in the Indian market. Even with wee range of products offered by Lic and Gic, the consumers are confused in the market. Their confusion will added increase in the face for large whole of products in the market. The existing level of awareness of the consumers for guarnatee products is very low. It is so because only 62% of the Indian citizen is literate and less than 10% educated. Even the educated consumers are ignorant about the varied products of the insurance.

- The insurers will have to face an acute question of the redressal of the consumers, grievances for insufficiency in products and services.

- Increasing awareness will bring whole of legal cases filled by the consumers against insurers is likely to increase substantially in future.

- Major challenges in canalizing the increase of guarnatee sector are stock innovation, distribution network, investment management, buyer service and education.

Essentials To Meet The Challenges

- Indian guarnatee commerce needs the following to meet the global challenges

- Understanding the buyer best will enable guarnatee fellowships to design thorough products, determine price correctly and increase profitability.

- Selection of right type of distribution channel mix along with prudent and productive Fos [Fleet On Street] management.

- An productive Crm system, which would ultimately create sustainable competitive advantages and build a long-lasting relationship

- Insurers must effect best investment practices and must have a strong asset supervision company to maximize returns.

- Insurers should increase the buyer base in semi urban and rural areas, which offer a huge potential.

- Promoting health guarnatee and using e-broking to increase the business.

Conclusion

Thus, in the last on basis of above the consulation we can close that need for incommunicable sector entry is justifiable on the basis of improving the efficiency of operation, achieving greater density and guarnatee coverage in the country and for greater mobilization of long-term savings for long gestation infrastructure projects. In the wake of such competition it is important for the government monopolies (Lic and Gic) that they fast up grade their technology, restructure themselves on more productive lines and control as broad run enterprise. New players should not be treated as rivalries to government companies, but they can supplement in achieving the objective of increase of guarnatee company in India.

* Lecturer, group of Commerce, Bharathiar University, Coimbatore-46
Email - buarticlecommerce@yahoo.com

** Ph.D Scholar, group of Commerce, Bharathiar University, Coimbatore. Email - parentbala@sify.com

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