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Unit 13: Insurance Industry: India

At that time LIC was the only corporation providing life insurance to the people of this country. Notes
Although its own business grew, the people it sought to serve remained largely unsatisfied and
unhappy. As the Indian populace grew, the LIC also grew, but there was also an increasing
clamour for removing the monopoly of the LIC. People basically wanted better service and a
wider range of products. But LIC failed on both counts. Despite these shortcomings, LIC continued
to grow on account of four factors, viz. the sheer need for insurance, the tax benefits it gave
taxpayers, the savings factor and its monopoly status.

Caselet General Insurers Focus on Retail, Small Towns to
beat Slowdown

T he economic slowdown and falling auto sales are prompting general insurers to
focus on retail segment and smaller towns.

Industry officials also say that there is an increasing focus on renewal premium, as the
new premium growth from the motor, engineering segments has slowed.

“The general insurance industry will definitely be impacted due to the slowdown. As
automobile sales are down, new premium collection will also dip. However, we are
focusing on more personal line of businesses and entering into small towns to offset this,”
general manager and whole-time director of New India Assurance K Sanath Kumar told
PTI.
Motor insurance is the single largest segment of general insurance industry.
However, slowing automobile sales and dearth of new projects have pulled down growth
to around 12 per cent in June from an average of around 18 per cent in the past.
Further, drastic dip in commercial vehicle sales due to the halting of mining operations
also has an impact on the industry.

“Going forward, we will bring down our over-dependence on motor insurance to well
below 60 per cent, and increase health insurance to about 20 per cent apart from growing
the fire, engineering and marine portfolios significantly,” Reliance General Insurance
chief executive Rakesh Jain said.

The industry is also facing the challenge of sustaining the investment income due to recent
RBI tightening.
Most of the general insurers have posted sound growth from sale of investments in the
first quarter due to fall in yields in government securities and other money market
instruments.
However, due to the recent RBI liquidity tightening measures, investment income is
likely to fall in the current quarter, said industry experts.
“As a company, we don’t focus much on investment income. Rather, our focus is on
underwriting profit, which is core to our operations,” Bajaj Allianz General Insurance
managing director and chief executive Tapan Singhel said, adding that company will
focus on protecting the income of distributors.

Source: http://articles.economictimes.indiatimes.com/2013-08-04/news/41059359_1_general-insurance-
industry-tapan-singhel-investment-income

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