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CH - 1 INDIAN INSURANCE INDUSTRY

1.1 RESEARCH PROPOSAL

1.1.1 PROBLEM STATEMENT:

The life insurance industry was the monopoly of Life Insurance Corporation of India till mid of 2001. Because of privatization, the environment has evolved a lot. The changing environment gives us enough opportunity to find the following queries.

* How the key success factors govern insurance industry?

* What would be the impact of privatization on the insurance industry?

1.1.2 RESEARCH OBJECTIVES:

* To study the macro-environment of Life Insurance Industry at National level with a brief overview of Global scenario.

* To understand the influence of present Key Success Factors on the future of industry.

* To understand the scenario of Life Insurance Industry.

* To apply models to analyze the prevailing business environment of the industry.

1.1.3 LITERATURE REVIEW:

Most of the data collection would be dependent on secondary sources of information. For the same, we would be relying on the following sources:

* Internet

* Newspapers

* Periodicals

* Magazines

* Publications and Journals

* Books

1.1.4 RESEARCH DESIGN:

The study may be viewed as a formal study that involves precise procedures and source specifications to test the hypothesis and answer the research questions posed.

1.1.5 NATURE AND FORM OF RESULTS:

The collected data would be analyzed using different models and managerial tools, like:

* Michael Porter's Five Forces Model

* BCG matrix

* Industries Competitive Strength Analysis - Opportunities and Threats

* Generic Competitive Strategies

1.2 INTRODUCTION

The single-most critical aspect of insurance is to protect an individual against losses that he or she cannot afford. The risk is negated by transferring the risk of an individual, business, or organization to an insurance company, or 'insurer'. The insurer then reimburses the insured for his or her losses by making payments to the individual on the basis of the terms that exist in the policy purchased by the individual. Usually the insurance contract provides for the payment of an amount on the date of maturity. Or at specified dates at periodic intervals, or at unfortunate death, if it occurs earlier.

An insurance policy offers much more than returns form tax planning and investment. It offers one the ability to plan for unforeseen events that could affect the family's financial well being adversely. Naturally, one has to pay a price to be paid for the payment of premiums by the assured.

Life insurance is universally acknowledged as a tool to eliminate risk, substitute certainty for uncertainty, and ensure timely aid of the family in the unfortunate event of the death of the breadwinner. Life insurance helps in two ways: premature death, which leaves a dependent family to fend for itself and old age without visible means of support.

While insurance coverage is essential, how much and what type of insurance people need differ with each individual. Like an individual's financial profile, his or her insurance needs are also different from others. It is up to him to decide how much risk he is willing to bear without insurance. However, the following factors should be taken into consideration while getting insurance:

 Number of dependents one has and their financial needs.

 The income and expenses of one's dependents.

 Significant foreseeable expenditures.

 Inheritance that one would leave to his dependents.

 Lifestyle one wants to provide for them in one's absence.

Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance.

1.2.1 DEFINITIONS

As stated in the very beginning, insurance companies bear risk in return for a fee called premium. Thus, insurance companies are risk bearers. They accept or underwrite the risk in return for an insurance premium. Accordingly, the term insurance may be defined as a co-operative mechanism to spread the losses caused by a particular risk over a number of persons who are exposed to t and who agree to ensure themselves against that risk. Risk is, in fact, uncertainty of financial loss. Risk must not be confused with loss itself that is the unintentional decline in or disappearance of value arising from a contingency. The functions of insurance include providing certainty, protection, risk sharing, and prevention of loss and capital formation. Wherever there is uncertainty with respect to a probable loss there is risk. The insurance is also defined as a social apparatus to accumulate funds to meet the uncertain losses arising though a certain hazard to a person insured for such hazard.

 GENERAL DEFINITION:

In the words of John Magee, "Insurance is a plan by themselves which large number of people associate and transfer to the shoulders of all, risks that attach to individuals."