10.4.1 Insurance is a means by which the problem of risk in business or life of an individual person is covered. The two main classes of insurance are: (a) general insurance which covers all forms of insurance other than life and is usually written on an annual basis, and (b) life insurance which is generally on a long-term basis against risk of death. Insurance statistics can be grouped under the following categories:
Life Insurance Statistics
Non-life (General) Insurance Statistics
Pension and Super-annuation Statistics
Health Insurance Statistics
Crop Insurance Statistics
Other Insurance Statistics like ESI, Postal Insurance, Army Insurance, etc.
10.4.2 As a part of the Financial Sector Reforms, a Committee on Reforms in Insurance Sector (CRIS), headed by Shri R.N. Malhotra, former Governor of RBI, was constituted in 1993. The main thrust of the Committees’ recommendations were: open up the insurance sector, improve the service standards of Indian insurance majors, and extend insurance coverage to a larger section of the Indian population to inject a greater degree of competition. The Insurance Regulatory Development Authority (IRDA) Bill was passed in both the Houses of Parliament in the year 1999 and IRDA came into existence as a Regulator for the Insurance business in India. The Act also provides protection to the interests of holder of insurance policy and aim to regulate, promote and ensure orderly growth of the insurance industry. It also seeks to amend the Life Insurance Act, 1956; General Insurance Business (Nationalisation) Act, 1972 and consequential provisions in the Insurance Act, 1938 with a view to open up the Indian Insurance industry to the private sector for further expansion of insurance business and to realise the untapped potential in the Indian insurance market. In order to provide better insurance coverage to citizens and also to augment the flow of long-term resources for financing infrastructure, the Insurance Regulatory and Development Authority (IRDA) was constituted with effect from 19 April, 2000. The Reserve Bank of India has also issued guidelines for the entry of NBFCs and Banks into the insurance business in May 2000 and August 2000, respectively.
10.4.3 Statistical information currently available on insurance is scattered and inadequate. With the entry of private insurance companies, the sources of information will be multiplied. It is, therefore, necessary that a single source of information, which can disseminate information to users is put in place. In this context, a Committee on Insurance Statistics was constituted by the National Statistical Commission with Shri H. Ansari, Member, IRDA as Chairman to examine the information required for the Insurance Sector. The Committee reviewed the current status of the statistical system in Insurance Sector, identified the data gaps and weaknesses in the existing data collection mechanism and recommended measures to correct deficiencies by revamping the system.
10.4.4 The data presently collected by the Life Insurance Company (LIC) and the General Insurance Company (GIC) largely meet their own requirements to assist management decisions, design strategy, formulate business plans, examine the market sizes, and changes in market environment, etc. The annual reports of LIC and GIC provide statistical information on various aspects of insurance statistics in their organisations. The General Insurance companies also supply statistical information to the Tariff Advisory Committee (TAC) in prescribed proforma to perform its function of scientific rating and pricing for general insurance products. The insurance companies also supply statistical information on assets and liabilities, sources of funds and deployment of funds and other aspects to RBI (quarterly/annual) as a part of the survey of the Financial Sector. The statistical system prevalent in these two agencies is given below:
10.4.5 The LIC collects information on various aspects of its operation such as:
Individual insurance business information – new business and sum assured, premium income, number of policies, rural and urban business, social sector schemes, etc.
Group and pension fund business – number of schemes, lives covered, premium income, etc.
Product-related information – Sales under various policies, number of lives investment, State-wise investment, etc.
Investment information – total investment, sectoral investment, instrument-wise investment, State-wise investment, etc.
Claims-related information – total claims settled, claims ratios, etc.
Cost and expenses information – total cost, management expenses, etc.
International operation – business procurement, investment, etc.
10.4.6 The GIC collects information on:
Balance sheet in respect of every class of business.
Major claims, details of investments – category-wise and assets owned, claims settlement position with settlement ratio, premium details, class: business-wise and region-wise, documents issued with documentation percentage, investments and investment income.
Investments, short-term loan placement, call money transactions, sanctions and disbursements.
Rural traditional covers and rural non-traditional business, cattle, poultry, Janta Personal Accident and other covers.
Data on foreign operations, Motor Accident Claims Tribunal (MACT) settlements, grievance redressal and details of commission and management expenses.
10.4.7 The IRDA on the advice of the Insurance Advisory Committee has framed fifteen regulations so far under the IRDA Act, which are to be followed by all insurers. It has also prescribed a number of returns to monitor various provisions of these regulations and the insurers in the life insurance business and general insurance business are required to statutorily submit these returns to the IRDA as per the periodicity and time frame specified. Most of the regulations, which require insurers to submit these returns to the IRDA, have been framed in the year 2000 only. The IRDA will be receiving these returns from the insurance companies as per the periodicity and time frame specified by it.
10.4.8 Insurers who do direct business need a mechanism of risk transfer so that they do not suffer from unduly large exposure. This is achieved by their sharing the risk, premium and claims with other insurers. This transaction is known as reinsurance. There are two types of reinsurers. One is a direct insurer who also accepts reinsurance from other insurers. The second category is a professional reinsurer who transacts only reinsurance business. The reinsurance business is international in character and is done for both life and non-life business. In the past, General Insurance Corporation was acting as principal reinsurer for its four subsidiaries and managing the statutory cessions, which they had to make as per provisions of Insurance Act, 1938. In addition, GIC managed the country’s non-life reinsurance business so as to ensure a maximum retention of premium within the country. In the emerging scenario, GIC has been notified as ‘Indian Reinsurer’ both for life and non-life business. The statistical data on reinsurance business have become all the more important in the emerging scenario.
10.4.9 In India, the total spending on health care in 1997 was a mere 5.6 per cent of GDP (4.4 per cent from private sources and 1.2 per cent from public sources). The few Indians who avail of some kind of health schemes are covered under: (a) CGHS (Central Government Health Scheme), (b) ESIS (Employees State Insurance Scheme), (c) Health schemes offered by the Railways to their employees, (d) Health schemes offered by Defence Services to their employees, (e) Health schemes offered by the State Government and allied administrative bodies, (f) Health schemes offered to employees by Multinational Companies and other employers, and (g) Health Insurance schemes. The statistical data currently available with the industry covers only (1) number of policies issued (combined for individual and group), (2) number of persons covered, (3) premium collected and (4) claims paid. As health insurance is likely to be a major business in the emerging scenario, the companies would need to collect and analyse the large amount of health insurance-related data.
10.4.10 Large-scale crop failures occur every year in one part of the country or the other due to natural calamities such as drought, flood, etc. The farmers in such areas not only lose their crop for the current year but are left with no money to invest in the future crop. In order to reduce the hardship of such farmers, the Government of India thought it fit to introduce Crop Insurance Schemes since 1973. The data on crop insurance have to be consolidated and published for analysis and policy formulation.
10.4.11 Even though existing insurance companies publish a large amount of information through their annual reports and other publications, certain data deficiencies still exist in the Insurance Sector. These are:
10.4.12 Some information as published by LIC is not readily available such as:
Ownership of Life Insurance namely, individual, Hindu undivided family, etc.
Gender-wise break up of insurance business.
Occupation-wise break up of policy holders, sum assured, etc.
Detailed information about operational mechanism, agency organisation, premium income, etc. is not publicly available for Postal Life Insurance, State Insurance and Army Group Insurance funds.
10.4.13 Presently, the data on general insurance are scattered. More reliable and timely data needs to be made available for smooth implementation of crop insurance scheme by means of linkages with State Governments and other organisations in the rural sector.
10.4.14 It is not only necessary to have a large amount of health-related data for actuarial rating and successful marketing/penetration of health insurance, but data is also needed on: (1) number of policies issued (2) number of persons covered, (3) premium collected, and (4) claims and disbursements on the basis of age, disease, gender and geographical location. Consolidated data on this should be published.
10.4.15 Reinsurance contracts are on a long-term basis. The data gap is in relation to risk-wise catastrophic exposure, as detailed mapping of the country has yet to be done. This becomes vital as both direct insurers and reinsurers could be exposed to catastrophic risks. A detailed compilation of data in terms of properties covered location-wise under different risk factors for individual risks and data on human lives and other animate objects on geographical location-wise basis and exposures against accidents, riots, natural calamities would be required.
10.4.16 In the case of the Insurance Sector, the annual accounts of Life Insurance Corporation of India and General Insurance Corporation of India and the four companies were analysed and estimates of the Domestic Product prepared. Similar information would now be required from other insurance companies operating in the country. The ‘commission to agents’ appearing on the expenditure side of the revenue accounts of the annual accounts of LIC, GIC and the four companies in the public sector is treated as unorganised activity in the Insurance Sector and is taken to be the mixed income of self employed. There is a need to provide the details of this un-organised activity and its break up for procuration of insurance business pertaining to all companies.
Conclusions and Recommendations
10.4.17 As the current state of collection and dissemination of the statistical information in the Insurance sector is inadequate, a system needs to be developed under a structured format rationalising existing returns and introducing new returns to fill up data gaps. The supply of information should be made mandatory by utilising the statutory powers of the Insurance Regulatory and Development Authority (IRDA). The collection and dissemination of data should rest with IRDA. The requirements of CSO and RBI as regards income, expenditure, appropriation, assets, liabilities, investment, etc. should also be furnished through IRDA. The Commission recommends that:
Information pertaining to the insurance sector should be collected and disseminated by Insurance Regulatory and Development Authority (IRDA). Income, expenditure, assets, liability, sources and uses of funds, investments, term structure, non-resident operations of insurance companies, etc. should be the major items of information. IRDA should establish a Research and Statistical Division for this purpose, rationalise existing returns and introduce new returns to collect necessary data.
The data should be consolidated by different categories of insurance, e.g. life, non-life, reinsurance, pension and super-annuation, health, crop, others.
In respect of Postal, Employees State Insurance, Army and other group insurance schemes, pension and super-annuation, essential information should be collected by IRDA and published.
Break-up of data by State, sector (rural-urban), ownership of insurance business, gender and occupation classification of policy-holders, etc. should be published.