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8/2/2019 Pls Use the Data to Your Project

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Pls use the data to your project

The brief outlook about the regulatory changes done by the Indian Government over theyears is given below.

The effect of insurance reforms has been positive on the insurance industry. There hasbeen positive growth in all the segments, with investments flowing in the right direction.Reforms have helped to achieve rapid growth in critical areas and sustain them over aperiod of timethrough channelized strategies.Post reforms, the number of players have increased from 4 to 22 players presentlyregistered under IRDA (INSURANCE REGULATORY AND DEVELOPMENTAUTHORITY OF INDIA).

The Various Players in the Indian Insurance Industry is given below.

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd3. HDFC Standard Life Insurance Co. Ltd4. ICICI Prudential Life Insurance Co. Ltd.


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5. ING Vysya Life Insurance Company Ltd.6. Life Insurance Corporation of India7. Max New York Life Insurance Co. Ltd8. Met Life India Insurance Company Ltd.9. Kotak Mahindra Old Mutual Life Insurance Limited

10. SBI Life Insurance Co. Ltd11. Tata AIG Life Insurance Company Limited12. Reliance Life Insurance Company Limited.13. Aviva Life Insurance Co. India Pvt. Ltd.14. Sahara India Life Insurance Co, Ltd.15. Shriram Life Insurance Co, Ltd.16. Bharti AXA Life Insurance Company Ltd.17. Future Generali Life Insurance Company Ltd.18. IDBI Federal Life Insurance Company Ltd.19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd20. AEGON Religare Life Insurance Company Limited.

21. DLF Pramerica Life Insurance Co. Ltd.22. Star Union Dai-ichi Life Insurance Comp. Ltd.

The Market leader in the insurance sector is public owned company LIC the marketshare picture of various companies is given below.

But recently in the year 2009 IRDA (Insurance Regulatory And Development Authorityof India) has brought in some regulatory changes, the effect of new regulations done byIRDA (Insurance Regulatory And Development Authority of India) has adverselyaffected the Insurance Industry. So what are these changes which have affected theInsurance Industry so badly the changes are given below in a brief manner.


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1. Agency commission for retail life insurance business:+ 7- 90% for 1st year premium if the premium paying term is more than 20

years+ 7- 10% for 1st year premium if the premium paying term is more than 15

years+ 7- 10% for 1st year premium if the premium paying term is less than 10

years+ 7% - yr 2 and 3rd year and 3.5% - thereafter for all premium paying terms.

2. In case of Mutual fund related - Unit linked policies commission or company

charges varies between 1.5% to 6% on the premium paid.

3. Agency commission for retail pension policies+ 7.5% for 1st year premium and 2.5% thereafter

4. Maximum broker commission - 30%

5. Referral fees to banks Max 55% for regular premium and 10% for single

premium.

As you can see in the in the Second point above the company according to the newrules set by IRDA for all ULIP products the company can charge the customer up to 6%of the premium paid by the customer were as before this rule was done by the IRDA thecompanies used to charge around 20% of the premium paid by the customer ascompany charges or commission.Since ULIP is the bread earner in the Insurance industry this rule has badly hit the cashinflow of the insurance companies as there has been a drastic reduction in thepercentage of premium what companies used to charge the customers for ULIPproducts.


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As shown in the above chart generally around 60% of the premium collected by theInsurance Companies come from the ULIP products and other 40% of the premiumcome from general insurance products, Endowment, Money Back policies and generallife insurance products.Due to these regulatory changes done by IRDA (Insurance Regulatory Development

Authority of India) with respect to ULIP products there has been a negative impact onthe Insurance Industry, according to one of the leading News papers survey due tosqueeze in margins on account of changes in unit-linked plans (ULIP) has forced privatelife insurance companies to close offices and retrench employees due to shortage ofworking capital.

During the first half of the fiscal 2010 private life insurance companies cut downbranches by 442. As of September, private life insurers had 8,227 branches ascompared to 8,667 as of March, data compiled by the Life Insurance Council shows.Private players also retrenched employees mainly in the sales division. The number of

employees for private companies reduced by 5,840 during the first half of the year to1.46 lakh employees, the data shows.


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The Worst hit companies were ICICI Prudential, HDFC, Met Life, Bharti AXA thenumber branches of individual companies closed down is given below.


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Some of the replies given by the Financial Experts for the shutting down of the branchesare given below:

Amitabh Chaudhry, managing director and CEO of HDFC Standard Life Insurancesaid in an interview We are looking at consolidating some of our branches and resizingsome of the others to manage expense.

Mr S.B. Mathur, Secretary General, Life Insurance Council, said that some privateplayers might take some more time to get adjusted to the new regulatory framework.

According toG Murlidhar, chief operatingofficer of Kotak Mahindra Life Insurance, thecompany intends to bring down the expenseratio from 18 per cent to 12-13 per cent inthe short term because the usual expenseratio for all private life insurers rangebetween 18-25 per cent but due to the newregulatory rules done by IRDA there hasbeen a reduction in the Cash Inflow and hasaffected the Working Capital of theCompanies so these measures have to betaken.

Considering the above circumstances we can actually see the importance of proper

Working Capital Management so that the company will be prepared to face any kind ofrisk which might arise in the future due to any reason like Competition in the Market,change in the regulations, slump in the market situation and so on.

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