Chemicals Pharmaceutical Textiles Preface|Foreword|Executive Summary|Banks|Non Banks|General Insurance|Life Insurance|Mutual Funds|Interview|Company Profiles|Partners|Launch Event|Editorial Team Industry Overview Structure of the Indian Banking Industry Regulatory & Policy Environment Performance of the Banking Industry Soundness Indicators of the Banking Industry Technology in Banking Issues and Challenges Development Finance Institutions Non-Banking Financial Companies Primary Dealers Industry Overview Evolution of the General Insurance Industry Performance of the Industry Industrial Segments Key Regulatory Policies Challenges and Outlook Industry Overview Evolution of the Life Insurance Industry Driving Factors Performance of the Industry Impact of the Global Financial Crisis Key Regulatory Policies Challenges and Outlook Industry Overview Evolution of the Industry Structure of the Mutual Fund Industry Regulatory Framework Current Scenario of the Mutual Fund Industry Issues & Future Outlook State Bank of India ICICI Bank Ltd Canara Bank Punjab National Bank HDFC Ltd Securities Trading Corporation of India Ltd National Bank for Agriculture & Rural Development Power Finance Corporation Ltd ICICI Prudential Asset Management Company Ldt UTI Asset Management Company Ltd Reliance Capital Asset Management Ltd HDFC Asset Management Company Ltd Life Insurance Corporation of India ICICI Prudential Life Insurance Company Ltd Bajaj Allianz Life Insurance Company Ltd SBI Life Insurance Company Ltd General Insurance Corporation of India The New India Assurance Company Ltd United India Insurance Company Ltd National Insurance Company Ltd Launch Event Launch Event - Airtel Partner

Need for Accuracy in Pricing of Risks

The continual entry of new private players coupled with the intense competition owing to the de-tariffication of the general insurance sector has also resulted in strengthening the bargaining power of the customers and development of customer centric insurance products. While the customer has benefited on account of the detariffing, the impact on the insurers has been less promising so far on account of the price wars and the resultant underwriting losses. Thus, it is apparent that without an accompanying development of systems to ensure accurate pricing of risks, the profitability and the solvency levels of the general insurance players would increasingly come under pressure. Insurers will have to improve and consolidate their processes for data mining and MIS for undertaking “informed underwriting risks”. Adequate training of underwriters and the sales staff for equipping them with the ability to respond to these new changes in the market would also have to be initiated by the insurance companies.

Challenges to Face in the Future

The current free pricing regime has set the backdrop for risk-based pricing over the longer term. Gradually, the industry players are expected to focus on franchise building (via improved client servicing), cost competitiveness and product differentiation, which in turn is likely to help them to face increased competition if and when the industry is opened up further to foreign direct investment. Most private players in the domestic general insurance business would require capital infusion for future growth. With most of the private entities being joint ventures, balancing the shareholding and business objectives of the partners while infusing capital to sustain growth is a challenge. This is further compounded by the weak underwriting environment at present. Despite these challenges, the long term outlook for the domestic general insurance industry remains positive because the current low levels of insurance penetration and the country’s long term economic growth potential.

Outlook Remains Positive

The general insurance industry has witnessed radical changes since the opening of the market to private players in the year FY00. The entry of private players invigorated the insurance industry, resulting in strong premium growth; improved marketing focus along with product innovations. The general insurance industry has been growing at a little over 16% CAGR over the past three years. In a growing economy, low insurance penetration in terms of premium percentage to GDP, as well as increasing affordability on account of higher disposable incomes and savings, increasing urbanisation and increasing awareness, are some of the factors that would continue to fuel growth of the general insurance sector in India.