Page 1 of 4

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 02 Issue 06

June 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ | 196 P a g e

Analysis of Insurance Industry

A Study of Life and Non-Life Insurance

Business

Siddela Narender & Gaddala Raja

Lecturer in Commerce, Priyadarshini Degree College, Huzurnagar

M.Com, SP College, Hyderabad

Email: snarilvn@gmail.com; Email Id: gaddalaraja16@gmail.com

ABSTRACT

This paper mainly focused on insurance real premiums

business with various regions and countries, life

insurance and non-life insurance density, life insurance

and non-non-life insurance penetration correlation

between segmentation. A well-developed and evolved

insurance sector is needed for economic develop ment as

it provides long term funds for infrastructure

development and at the same time strengthens the risk

taking ability. It is estimated that over the next ten years

India would require investments of the order of one

trillion US dollar. The Insurance sector, to some extent,

can enable investments in infrastructure development to

sustain economic growth of the country. Insurance is a

federal subject in India. There are two legislations that

govern the sector- The Insurance Act- 1938 and the

IRDA Act- 1999.

Keywords: Life Insurance, Non-Life Insurance,

Density, Penetration.

INTRODUCTION:

Insurance is one of the demanding financial

products in India. Its basic motto is to protect the family

of any uncertainty in life. So it is long term investment

and need knowledge about that. Indian life insurance is

too old. It is there from British Period and after

nationalization; it has come fully under Government.

The Indian insurance market is a huge business

opportunity. India currently accounts for less than 1.5

per cent of the world’s total insurance premiums and

about 2 per cent of the world’s life insurance premiums

despite being the second most populous nation. The

country is the fifteenth largest insurance market in the

world in terms of premium volume, and has the

potential to grow exponentially in the coming years.

increase at a Compound Annual Growth Rate of 12-15

per cent over the next five years.

The insurance industry plans to hike

penetration levels to five per cent by 2020. For

economic development investments are necessary.

Investments are made out of savings. Life Insurance

Company is a major instrument for the mobilization of

savings of people, particularly from the middle and

lower group. All good life insurance companies have

huge funds accumulated through the payments of small

amounts of premium of individuals. These funds are

invested in ways that contribute substantially for the

economic development of the countries in which they

do business

The economic reform of 1991 played a pivotal

role in the economic development of India. Reaping its

benefit the growth of the country reached around 7.5%

in the late 2000s. Insurance is a risk transfer mechanism

whereby the individuals or the business enterprise can

shift some of the uncertainties of life on the shoulder of

other. In peace the insurance providers of trade industry

which ultimately contribution towards human progress.

The Indian insurance market is the 19thlargest

globally and ranks 5thin Asia, after Japan, South Korea

china and twain. In 2003, total Ross premiums collected

amount to USD 17.3billion representing just under

0.6%of world premiums. Similar to the pattern observed

in other regional market and reflecting the country’s

high savings rate, life insurance business accounted for

78.5% of total gross premiums collected in the year,

against 21.5 for non-life insurance business1

.

India’s life insurance sector is the biggest in the world

with about 360 million policies which are expected to 1 “Global Insurance Practices and Outlook”. ISBN- 978-93-85817-00-7. Journal

Page 2 of 4

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 02 Issue 06

June 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ | 197 P a g e

REVIEW OF LITERATURE

Chollet, Deborah J.(2000) has made an article on

“Consumers, Insurers, and Market Behavior”. In this

article, the author examines exactly who is in the

individual insurance market and how consumers in this

market compare with the uninsured and employer- insured populations. Differences between the operation

of the individual and group markets are considered,

including variations related to the structure of sellers in

the market. The article concludes with some 13 thoughts

about information that might improve public policy

governing private health insurance with particular

reference to the individual insurance market in America.

Vivek Gupta(2004) in his paper “Insurance Industry: An

Indian Perspective” details the major factors that have

influenced the Indian insurance industry in the new

millennium including the emergence of new distribution

channels to market insurance companies, rapid

developments in technology and changing industry laws

and regulations. He also makes an in-depth analysis of

the change in the Indian insurance industry after

deregulation. Pradeep Kansal(2004) in his study titled

“Transformation of Insurance in India” explained that

the foreign investors are finding Indian market more

attractive because even a small share of a growing

market looks lucrative. He concluded that in this fast

developing scenario it will not be enough if companies

have the futuristic strategies. Implementation of the

strategies and effectively adapting them to ongoing

changes can spell success. Jawharlal, U.(2004) in his

study titled “Indian Insurance – Market Scenario” stated

that the four years that our country has of a liberalized

insurance domain, presented contrasting pictures of

growth and consolidation on the one hand, and

insufficient understanding and lopsided priorities on the

other. And also he felt that the players realign

themselves positively, the real purpose for which the

industry has been opened up would be hard to realize.

He suggested that insurers would do well to spread the

message of insurance in its right earnest so that these

adventurous tendencies among the policy holders are

arrested.

OBJECTIVES OF THE STUDY

1. To study the insurance business in various

regions of the world.

2. To analyse the density of life and non-life

insurance industry.

3. To evaluate the penetration of non-life and life

insurance industry.

METHOD OF THE STUDY

This study is based on the secondary data. The

secondary data is collected from annual reports

of IRDA, Journals and websites.

The period of the study is for 5 years i.e.2010

to 2016. The study mainly focused on

insurance industry density, penetration and real

premium growth rate. The study was used

simple statistical tools used as correlation.

Life Insurance:

Life insurance is a protection against financial

loss that would result from the premature death of an

insured. The named beneficiary receives the proceeds

and is thereby safeguarded from the financial impact of

the death of the insured. The death benefit is paid by a

life insurer in consideration for premium payments

made by the insured.

Non-Life Insurance:

Non-life insurance is also called the property

and casualty insurance, it is a type of coverage that is

very common and covers businesses and individuals. It

protects them monetarily, from disaster by providing

money in the event of a financial loss. Before purchase

this type of insurance or already own any kind of non- life insurance, policy holder should understand what it

is.

Insurance Density:

It refers to a product's number of customers

by geographic area (country, state etc). Usually

expressed a ratio of premium to population.

Insurance Penetration:

Insurance penetration refers to a product's sales

volume relative to the sales volume of competing

products, usually expressed as a ratio of premium to

another financial measure like Gross Domestic Product.

Table-1

Density of Life and Non-Life Ins urance

Years Life (Density) Non-Life (Density)

2011 49.0 10.0

2012 42.7 10.5

2013 41.0 11.0

2014 44.0 11.0

2015 43.2 11.5

Total 219.90 54.0

R= -0.69411

Source: Annual Report 2015-16

Page 3 of 4

Journal for Studies in Management and Planning

Available at http://edupediapublications.org/journals/index.php/JSMaP/

ISSN: 2395-0463

Volume 02 Issue 06

June 2016

Available online: http://edupediapublications.org/journals/index.php/JSMaP/ | 198 P a g e

It is observed that form the above table-1; it

measures life and nonlife insurance density. Life

insurance density (219.90) is greater than the non-life

insurance density (54.0), the life and non- life density

has positive growth rate in 2011 (49) and (10). As in

2015 (43.2) and (11.5) respectively. Therefore, Life and

Non-life insurance correlation is negative relation (R= -

0.69411) of both the insurance density segmentation.

Table-2

Penetration of Life and Non -Life Ins urance

density. The insurance industry density and penetration

is in 2011 (59) & (4.1) and 2015 (54.7) & (3.44)

respectively. Therefore, overall insurance industry

density and penetration is positive relation (R=

0.176792) of both the segment.

Table-4

Total Real Premium Growth Rate

Regions/Coun

tries

Life

insurance

Non-Life

insurance

Tot

al

Advance

Countries 2.5 2.6 2.5

Emerging

Countries 12.0 7.8 9.8

Asia 7.8 9.2 8.2

India 7.8 8.1 7.9

World 4.0 3.6 3.8

Source: Annual Report 2015-16

2015-16

Source: AnnualReport

The above table-4 shows that, the regions and

country wise total real premium growth rate of life and

non-life insurance business. Life insurance real

premium growth rate of the advanced countries are

From the above table-2, it measures the reflect

life and non-life insurance penetration. Life insurance

penetration is less than the non-life insurance

penetration i.e. in 2011 (3.4) & (10) and 2015 (2.72) &

(11.5) respectively. Therefore, life and non-life

insurance correlation is negative i.e. (R= -0.8613) of

both the life and non-life insurance penetration

segmentation.

Table-3

Density and Penetration of Ins urance Indus try

Years

Insurance Industry

Density Penetration

2011 59.0 4.10

2012 53.2 3.96

2013 52.0 3.90

2014 55.0 3.30

2015 54.7 3.44

R= 0.176792

Source: Annual Report 2015-

16

It is known that from the table -3, it measures

the reflects of overall insurance industry penetration and

occupied least place (2.5) and Emerging Countries

(12.0) are occupied the first place in the insurance

business. While Non-life insurance real premium

growth rate of the advanced countries are occupied least

place (2.6) and Asia region (9.2) is occupied the first

place in the insurance business. Hence, the overall real

premium growth rate of the advanced countries are

occupied least place (2.5) and Emerging Countries (9.8)

are occupied the first place in the insurance business.

CONCLUSION:

It is concluded that the Life and Non-life insurance

correlation is negative relation of both the insurance

density segmentation. While life and non-life insurance

correlation is positive relation of both the penetration

segmentation. Therefore, overall insurance industry

density and penetration is positive relation of both the

segmentation. Hence, the advanced countries overall

growth rate is also occupied the least place, and

emerging countries are first place in the life and non-life

insurance real premium growth rate is second place in

Asia region.

The measuring of insurance penetration and

density reflects the level of development of insurance

sector in a country. While insurance penetration is

measured as the percentage of insurance premium to

Years

Life

(Penetration)

Non-Life

(Penetration)

2011 3.40 10.0

2012 3.17 10.5

2013 3.10 11.0

2014 2.60 11.0

2015 2.72 11.5

R= -0.8613