Notes on the General insurance business in India

General insurance business in India came into hands of public sector under the caption of General Insurance Corporation of India and its four subsidiaries viz., National Insurance Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd. and United India Insurance Company Ltd. in 1972.

The prospects of General Insurance business is analysed under Gross Direct Premium Income, Investment Income, Profit After Tax, underwriting experience, Crop Insurance, Rural Insurance and foreign business.

Fire Insurance:

The amount of gross direct premium income in fire insurance has increased from Rs. 683 crore in 1990-91 to Rs. 1,997 crore in 1997-98 and is expected to go upto Rs. 3,500 crore in 2005. The business of fire insurance is comparatively better than marine insurance but better than miscellaneous insurance.

Marine Insurance:

The gross direct premium income of marine insurance has increased from Rs. 524 crore in 1990-91 to Rs. 1,055 crore in 1997-98 and is expected to increase upto Rs. 1,550 crore in 2004-2005. It is very slow progress of marine insurance.

Miscellaneous Insurance:

The gross direct premium income of miscellaneous insurance has increased from Rs. 1,706 crore in 1990-91 to Rs. 5,034 crore in. 1997-98 and is expected to rise up to Rs. 9,000 crore in 2004-2005.

The insurance of motor vehicles and other accident insurance have become compulsory. So the miscellaneous insurance has increased faster than those of fire insurance and marine insurance. The general insurance in India is not progressing as expected.

The gross direct premium is indication of the insurance business, but it does not increase as firstly as expected by public.

It shows that general insurance business has increased its investment income by more than two times during 1990-91 to 1997-98 and by about six times during 1990-91 to 2004-2006. It reveals that the investment income has increased faster than the gross direct premium income.

Profit after Tax :

The profit after tax increased from Rs. 334 crore in 1990-91 to Rs. 1,255 crore in 1997-98 and is expected to increase to Rs. 2,300 crore by 2004-2005. Thus, the profit has increased faster than the investment income and gross direct premium income. The profit is expected to increase by more than six times to 2004-2005.

Underwriting Experience :

Net premium of general insurance business has increased from Rs. 2,742 crore in 199-91 to Rs. 7,357 crore in 1997-98. Expenses of management have also increased from Rs. 652 crore in 1990-91 to Rs. 1,799 crore in 1997-98.

Although unexpired risk reserves have also increased but in a slow rate. The underwriting loss has gone upto Rs. 705 crore in 1994-95 after getting profit of Rs. 82 crore in 1993-94.

All the performances of general insurance business have been discouraging. With the entry of private insurers, the performances of GIC and its 'subsidiaries are expected to go up because of competition and availability of measurement parameter.

If private insurers enter for profit, why not GIC and its subsidiaries should earn profit. The causes of profit and the diagnose of losses reveal the points of modifications.

Crop Insurance :

Crop insurance scheme was implemented in India since 1985. State Government is required to share the premium and claim in the ratio of 2: 1. At present, the scheme is implemented in 15 states and 2 union territories.

It is available for crop loans in selected areas for selected crops. During 1997-98 51.35 lakh farmers and 6.82 lakh farmers were covered for a sum insured of Rs. 2,230.74 crore and Rs. 322.37 crore in kharif 1997 season and Rabi 1997-98 season, respectively. The premium income for the period was Rs. 34.32 crore and, Rs. 5.72 crore for Kharif and Rabi season, respectively.

During 1997-98 seasons, Experimental Crop Insurance Scheme for non-loaned small and marginal farmers was implemented in selected 24 districts of 8 states.

The premium is totally subsidised for small and marginal, farmers and premium and claims are shared between Centre and State Government in the ratio of 4: 1. Under this scheme, 4.78 lakh farmers are covered for a sum insured of Rs. 172 crore in 14 districts of 5 states.

Rural Insurance :

During 1997-98, new schemes have been devised such as Fetus Insurance Scheme and the Calf Heifer Rearing Insurance Scheme as recommended by the Task Force Committee on Cattle Insurance constituted by the Government of India. Farmers Package Policy was introduced to cover all the assets of the farmers under one policy. Aquaculture Insurance Scheme is also introduced for the benefit of rural population.

Foreign Business :

GIC and its subsidiaries operate foreign business. During 1997-98, direct overseas operations of the four subsidiary companies produced a gross premium income of Rs. 382.95 crore as against Rs. 367.05 crore in 1996-97.

Net claims amounted Rs. 245.41 crore during 1997-98. Foreign business of GIC and its subsidiaries is expected to increase as a result of foreign insurers.