Life Insurance Industry in India (A perspective on Marketing and Foreign Direct Investment) ICACEMT 2013 Dr. Sunmeet Banerjee

Professional snapshot: Twenty years of professional experience with a proven track record of achieving exceptional results. Four years in management education and fifteen years in sales, marketing and business development. Been invited regularly by DD, Jaipur in a youth centric program “Yuv Tarang”.

Life Insurance Industry in India The life insurance sector of India added up to 4.1% of the GDP. The contribution in FDI by the life insurance segment was recorded at US $ 1.3 billion. The government is likely to increase the FDI cap limit from 26% to 49%, a bill of which is pending at the Rajya Sabha. As on March 2012 total number of life insurers registration with the Insurance Regulatory Development Authority (IRDA) is twenty four (24).

Foreign Direct Investment As per the current Foreign Direct Investment (FDI) norms, foreign participation in an Indian insurance company is restricted to 26.0% of its equity / ordinary share capital. IRDA has stipulated that foreign investment in Indian Insurance companies be limited to 26% of total equity issued (FDI limit) with the balance being funded by Indian promoter entities The Indian government has supported an increase in the FDI limit, which requires a change in the Insurance Act. The Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding be increased to 49.0%.

FDI - Current scenario The Indian government has tabled the bill in the Upper House of Parliament in August 2010. The limit to foreign investment includes both direct and indirect investment and has been a cause of significant lobbying by foreign insurance companies for a change in regulations to increase the FDI limit to 49% of equity issued. Almost all big global insurance companies have formed JV’s with Indian insurers.

Life insurance – Marketing Life Insurance Marketing is one of the most strenuous jobs because of the everlasting conflict between the insurance companies which want to profit the most and the insured person who wants to get as much compensation as possible from the insurance company. According to industry observers, one of the main reasons for the low insurance penetration in India was the ineffective distribution and marketing strategies adopted by LIC.

Life insurance – Marketing Analysts feel that the private insurers are making the industry marketing-driven, wherein technical and service excellence would be the key factors of success. Private companies, in a bid to make their presence felt and their brand noticed, initiated a series of aggressive marketing and promotion initiatives, something that buyers of insurance were not accustomed to. Such frenzy prompted IRDA to frame an advertisement code for companies.

Life insurance – Marketing According to reports, currently insurance companies spent 12 – 15% on advertising and publicity than last year. Market share of private players has increased from 0.5% in 2001 to 7% in October 2002 and almost 35% in 2009, which has reduced LIC’s market share substantially. Bulk of LIC’s sales came from the small and rural sectors, which actually constitute the largest untapped insurance market in India.

Life insurance – Marketing Private insurers failed to tap the rural markets due to their limited reach. Marketing and technical superiority were expected to be the decisive factors for success in the Indian insurance sector in the future. Product-specific advertisement is catching up, private insurers who planned to launch innovative products are hoping for the best. Private insurers focused their marketing efforts only in limited metropolitan/ A and B city areas, they have a tough battle ahead as LIC’s brand is very firmly etched.

Reasons for hope Total life insurance premium in India is projected to grow to Rs 1,230,000 crore by 2013. A booming life insurance market has propelled the Indian life insurance agents into the ‘top 10 country list’ in terms of membership to the Million Dollar Round Table (MDRT) — an exclusive club for the highest performing life insurance agents. More private insurers in anvil after a decision to increase the FDI.

Life Insurance Co’s: (17/09/12) Bajaj Allianz Life Insurance Company Limited, Pune Birla Sun Life Insurance Co. Ltd, Mumbai HDFC Standard Life Insurance Co. Ltd., Mumbai ICICI Prudential Life Insurance Co. Ltd., Mumbai ING Vysya Life Insurance Company Limited, Bangalore Life Insurance Corporation of India, Mumbai Max New York Life Insurance Co. Ltd., Gurgaon Met Life India Insurance Company Limited, Bangalore Kotak Mahindra Old Mutual Life Insurance Limited, Mumbai SBI Life Insurance Co. Ltd., Mumbai TATA AIG Life Insurance Company Limited, Mumbai Reliance Life Insurance Company Limited, Mumbai

Life Insurance Co’s: (17/09/2012) Aviva Life Insurance Company India Limited, Gurgaon Sahara India Life Insurance Co. Ltd., Lucknow Shriram Life Insurance Co. Ltd., Hyderabad Bharti Axa Life Insurance Company Ltd., Mumbai Future Generali Life Insurance Company Limited, Mumbai IDBI Federal Life Insurance Company Ltd., Mumbai Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd., Gurgaon AEGON Religare Life Insurance Company Limited, Mumbai DLF Pramerica Life Insurance Co. Ltd., Gurgaon Star Union Dia-ichi Life Insurance Co. Ltd., Mumbai IndiaFirst Life Insurance Company Limited, Mumbai Edelweiss Tokio Life Insurance Co. Ltd., Mumbai

Conclusions Life insurance industry plays a significant role in the socio – economic development of our country. It is imperative for the industry to attract maximum foreign investments. Best marketing strategies to the dynamics of market. Technology and branding will play a key role in market dynamics. Contemporary and innovative products coupled with excellent customer services are pre- requisites for gaining a foothold in the highly competitive life insurance market.

Conclusions The advent of private sector with foreign capital has led to fierce competition which has lead to aggressive marketing, promotional strategies, innovative products and services and better customer services (including prompt settlement of claims) which is a positive development for the whole life insurance industry. The government must consider the proposal for infusion of foreign direct investment to the tune of fifty one percent (51%) which will be conducive for the over-all growth and development of the insurance sector.

Thank you and all the best... ICACEMT 2013