Market VS Market Expansion

Dr Ranjan Das
Professor of Strategic & International Management, IIM Calcutta Consulting Editor, Strategic Marketing
Raveendra C. Doctoral Research Scholar, IIM Calcutta

The sweep of reforms and liberalisation, initiated in the early nineties, dramatically changed the face of many sectors in the financial services industry. Insurance sector was one of the last to be opened up to private competition in the late nineties with the formation of Insurance Regulatory and Development Authority (IRDA). Within the insurance sector, while life insurance segment witnessed dramatic improvements since the introduction of reforms, the changes and growth in general insurance segment were less profound. This is reflected in growth in insurance density1 in India in terms of premiums per Capita in USD; which grew from USD 6.1 in 1999 to USD 9.1 in 2001 in life segment (49 per cent growth), while it remained stable for non-life segment in the same period at USD 2.4 per capita. This article analyses the state of the general insurance industry in India and argues that the players appear to be too pre-occupied with market share instead of focusing efforts on expanding the market pie. The insurance opportunity in India lies primarily on development and expansion of the market and those players that follow pioneering strategies to expand the market would stand to gain a sustainable competitive advantage.

GENERAL INSURANCE INDUSTRY IN INDIA
The general insurance industry took roots in India way back in 1850, with the establishment of Triton Insurance Company Ltd. in Calcutta. The central government nationalised the general insurance industry in India and set up General Insurance Corporation of India (GIC) in November 72. 107 Indian and foreign insurers which were operating in the country prior to nationalisation were grouped into four operating subsidiaries of GIC, namely, (i) National Insurance Company Limited; (ii) New India Assurance Company Limited; (iii) Oriental Insurance Company Limited; and (iv) United India Insurance Company Limited. All these four subsidiaries of GIC competed with one another and underwrote various classes of general insurance business except aviation insurance of national airlines and crop insurance which was handled by the GIC.

Insurance sector reforms
The genesis for the insurance sector reforms was formation of Malhotra Committee in 1993 and submission of its report in 1994, recommending wide ranging reforms. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999 which ushered in the entry of private sector under the guidance and supervision of a regulatory body, IRDA. Since being set up as an independent statutory body, the IRDA put in a framework of globally compatible regulations. As at March 2004, eight general insurance companies were registered in the private sector.
The general insurance players fix the insurance premiums of many products based on tariffs set by the Tariff Advisory Committee. As the players gain experience and maturity, there are growing demands for de-tariffing2 , which also enables players to differentiate themselves better.

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