Life insurance in India

From Wikipedia, the free encyclopedia

Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC.

In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector.

While the committee submitted its report in 1994, it took another six years before the enabling legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The same year that the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDA -- started issuing licenses to private life insurers.

Contents

[edit] List of Life Insurers (as of Sept, 2006)

Apart from Life Insurance Corporation, the public sector life insurer, there are 17 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants.

Life Insurer in Public Sector

  1. Life Insurance Corporation of India

Life Insurers in Private Sector

  1. Bajaj Allianz Life, Pranav,Surat 1
  2. MNYL Life Insurance
  3. ICICI Prudential Life Insurance
  4. Sahara Life Insurance
  5. Tata AIG Life
  6. HDFC Standard Life
  7. Birla Sunlife
  8. SBI Life Insurance
  9. Kotak Mahindra Old Mutual Life Insurance
  10. Aviva Life Insurance
  11. Reliance Life Insurance Company Limited - Formerly known as AMP Sanmar LIC
  12. Metlife India Life Insurance
  13. ING Vysya Life Insurance
  14. Max Newyork Life Insurance
  15. Shriram Life Insurance
  16. Bharti AXA Life Insurance Co Ltd
  17. Future Generali Life Insurance Co Ltd
  18. IDBI Fortis Life Insurance Co Ltd
  19. Aegon Religare Life Insurance Co Ltd

[edit] Foreign Direct Investment (FDI) Policy in Insurance Sector

As per the current (Mar 06) FDI norms, foreign participation in an Indian insurance company is restricted to 26.0% of its equity / ordinary share capital. The Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding be increased to 49.0%. However, the matter is still under discussions.


[edit] Indian Life Insurance Industry Overview

All life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no risk in going in for private insurance players. In terms of being rated for financial strength like international players, only ICICI Prudential is rated by Fitch India at National Insurer Financial Strength Rating of AAA(Ind) with stable outlook indicating the highest claims paying ability rating.

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the largest player in the market. Among the private sector players, ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential PLC) is the largest followed by Bajaj Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz). The private companies are coming out with better products which are more beneficial to the customer. Among such products are the ULIPs or the Unit Linked Investment Plans which offer both life cover as well as scope for savings or investment options as the customer desires.Further, these type of plans are subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Hence, comparison of such products with mutual funds would be erroneous.

[edit] Commission / Intermediation fees

  • The maximum commission limits as per statutory provisions are:

Agency commission for retail life insurance business:

      • 35 - 40% for 1st year premium if the premium paying term is more than 20 years
      • 25 - 30% for 1st year premium if the premium paying term is more than 15 years
      • 10 - 15% for 1st year premium if the premium paying term is less than 10 years
      • 7.5% - yr 2 and 3rd year and 5% - thereafter for all premium paying terms.

In case of Mutual fund related - Unit linked policies it varies between 1.5% to 60% on the premium paid.

    • Agency commission for retail pension policies:
      • 7.5% for 1st year premium and 2.5% thereafter
  • Maximum broker commission - 30%
  • Referral fees to banks – Max 55% for regular premium and 10% for single premium. However in any case this fee cannot be more than the agency commission as filed under the product.
  • However, the above commission may be further subject to the product wise limits specified by IRDA while approving the product.