1273648, Shubhra Sharma, F2, Q.37, Comment on Governance and Regulatory changes in Non-Life Insurance

Q1. <1273648-Shubhra Sharma – F2 – Moushmi Gupta – F1>http://www.youtube.com/watch?v=BjygSNuY_cY&feature=youtu.be

Q.2 <1273648-Shubhra Sharma, F2, Q37, Comment on Governance and Regulatory changes in Non-Life Insurance>

INTRODUCTION

General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event.General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and casualty insurance in the U.S. and Canada and Non-Life Insurance in Continental Europe.

Non-life insurance industry in India

According to Swiss Re,India’s non-life insurance market was ranked number 19 among 156 countries in terms of premium in FY11; India’s total premium in while the global total premium grew by 2.1%. The sector has grown at a CAGR of 16% over the last 10 years.The number of policies issued increased at a rate of 16.52% to 79.3 million in FY11 from 67.5 million in FY10. million in FY11 from 67.5 million in FY10.

The gross written premium underwritten by the non-life insurance sector in FY11 was INR453 billion up from INR369 billion`growth of 23% over the previous year of 15.34%.In terms of segment-wise composition, major retail lines such as motor and health constitute more than 65% of the Gross Written Premiums in the market; higher percentage is primarily on account of the mandatory Gross written premium non-life insurance (in INR billion)Exhibit 3.6.Key constitute around 16% of total market premiums.Personal accident, liability, aviation,engineering and miscellaneous segments are categorized under  others which constitutes around 17%.

DISCUSSION

JUNE 2012 ISSUE

 This summarises key developments and regulatory changes during the quarter April-June 2012.

The Indian general insurance industry closed FY2011-12 with a healthy growth of approximately 23.3 per cent.The main concerns faced by the industry continue to be the underwriting losses largely on account of the commercial vehicle’s third party motor pool.

In an attempt to reduce losses in the motor insurance segment,IRDA has dismantled the third party motor pool with effect from 1 April 2012 & replaced it with the ‘declined risk pool system’ wherein the insurers will cede only those risks that do not meet the approved underwriting standards of the  company.

The market continues to attract potential new entrants, with two new players,promoted by the Videocon Group and Magma Leasing, while launch operations soon.

The government is also said to be mulling over listing state owned general insurance companies on the stock exchange.The national re-insurer GIC Re is likely to be one of the first firms to get the nod from the government. These and other regulatory and market developments are briefly covered in this issue.

CONCLUSION

The non-life insurance market has a considerable amount of latent potential, given the fact that the Indian economy is expected to do well in the coming decades leading to increase in per capita incomes and awareness.The industry should be given time to adjust to regulatory changes in a phased manner aligned with a regulatory impact assessment.Regulations need to drive transparency and simplification of products and services.The stakeholders should eventually work toward maintaining a favourable environment for stable growth,increasing the penetration of insurance to rural and under penetrated areas and increasing the contribution to the economy.