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    Imperfections in Insurance Markets

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    ddas@gu
    This document discusses imperfections in insurance markets. It begins by outlining the objectives of highlighting changes in the Indian insurance industry, discussing issues with a perfectly competitive insurance market, understanding market imperfections, and gaining insight into information problems. It then provides examples of changes in the industry and lists private insurance companies in India and their partners. It also discusses distribution networks, bancassurance arrangements, conditions for a perfectly competitive market, categories of market imperfections like information problems and moral hazard, and potential solutions. Finally, it introduces the concept of human life value and how it is a function serving different purposes and stakeholders.

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    Imperfections in Insurance Markets

    Uploaded by

    ddas@gu
    619 views13 pages
    This document discusses imperfections in insurance markets. It begins by outlining the objectives of highlighting changes in the Indian insurance industry, discussing issues with a perfectly competitive insurance market, understanding market imperfections, and gaining insight into information problems. It then provides examples of changes in the industry and lists private insurance companies in India and their partners. It also discusses distribution networks, bancassurance arrangements, conditions for a perfectly competitive market, categories of market imperfections like information problems and moral hazard, and potential solutions. Finally, it introduces the concept of human life value and how it is a function serving different purposes and stakeholders.

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    This presentation talks about asymmetric information in Insurance markets

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    This document discusses imperfections in insurance markets. It begins by outlining the objectives of highlighting changes in the Indian insurance industry, discussing issues with a perfectly competitive insurance market, understanding market imperfections, and gaining insight into information problems. It then provides examples of changes in the industry and lists private insurance companies in India and their partners. It also discusses distribution networks, bancassurance arrangements, conditions for a perfectly competitive market, categories of market imperfections like information problems and moral hazard, and potential solutions. Finally, it introduces the concept of human life value and how it is a function serving different purposes and stakeholders.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    619 views13 pages

    Imperfections in Insurance Markets

    Uploaded by

    ddas@gu
    This document discusses imperfections in insurance markets. It begins by outlining the objectives of highlighting changes in the Indian insurance industry, discussing issues with a perfectly competitive insurance market, understanding market imperfections, and gaining insight into information problems. It then provides examples of changes in the industry and lists private insurance companies in India and their partners. It also discusses distribution networks, bancassurance arrangements, conditions for a perfectly competitive market, categories of market imperfections like information problems and moral hazard, and potential solutions. Finally, it introduces the concept of human life value and how it is a function serving different purposes and stakeholders.

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    IMPERFECTIONS IN

    INSURANCE MARKETS

    Debabrata Das Ph. D


    Reader
    Dept. of Commerce
    Gauhati University
    Objectives
     To highlight the changing face of insurance
    industry in India
     To discuss the issues of a perfectly
    competitive insurance market
     To understand the Insurance Market
    Imperfections
     To have an insight into the information
    problem existing in the insurance market
    The changing Pace of Insurance
    1. Closed Sector to open sector
    2. Customization (Flexibility)
    3. Insurance marketing to financial planning
    4. Single channel to Multiple channels
    5. Branding
    Private Players
    Company Indian Partner Foreign Insurer Area

    Birla Sun Life Aditya Birla Group Sun Life, Canada Life

    OM Kotak KotakMahindra finance Old Mutual, South Africa Life

    HDFC-Standard Life HDFC Standard Life, UK Life

    Royal Sundaram Sundaram Finance Royal Sun, UK Life & Non- Life

    ICICI-Prudential ICICI Prudential, UK Life

    Max New York Life Max India New York Life, USA Life

    Tata-AIG Tata Group AIG, USA Life & Non- Life

    ING Vysya Vysya Bank ING Insurance, Netherlands Life

    Aviva Dabur CGU Life, UK Life

    MetLife India Jammu & Kashmir Bank MetLife, USA Life

    Bajaj Allianz Bajaj Auto Allianz Life & Non- Life

    AMP Sanmar Sanmar Group AMP, Australia Life

    SBI Life Insurance SBI Cardiff, Finance Life


    Private Players in General Insurance
    Company Indian Partner Foreign Insurer
    Royal Sundaram Sundaram Finance Royal Sun, UK
    General Insurance
    Reliance general Insurance Reliance Industry --
    IFFCO-Tokio General Insurance Indian Farmers Fertilizers The Tokio Marine and Fire Insurance
    Co-operative Ltd. (IFFCO)

    Tata-AIG General Insurance Tata Group AIG, USA


    Bajaj Allianz General Insurance Bajaj Auto Allianz AG
    ICICI-Lombard General Insurance ICICI Lombard Canada Ltd., Canada

    Choamandalam General Insurance Co. Murugappa Group --

    S. Kumars, J&K Bank Undisclosed


    Undisclosed Chubb, USA
    Undisclosed Yasuda Marine and Fire
    Undisclosed Mitsui Marine and Fire
    Citibank Undecided
    Videocon International Talks with BNP Paribas, AXA,
    France
    Distribution Network
    Direct Selling – Agents
    Direct marketing
    Financial advisors/consultants
    Indirect Selling – Bundled products with commodity

    Bundled Products with other financial


    services
    Partner Selling – Bancassurance
    Postal Department
    Selling through corporates
    Bancassurance Arrangements
    Insurance Company Bancassurance partner

    Allianz Bajaj Standard Chartered Bank

    Birla Sun Life Citibank


    Dabur – CGU Canara Bank/ Lakshmi Vilas Bank, ABN Amro Bank
    & American Express Bank

    HDFC-Standard Life Union Bank/Indian Bank


    ICICI Prudential Life ICICI Bank
    ING Vysya life Vysya Bank
    LIC Corporation bank, Oriental Bank of Commerce,
    Indian Overseas Bank

    Met life J & K Bank


    SBI-Cardiff Life Insurance SBI

    Tata-AIG Life Insurance Citibank


    Conditions for a Perfectly Competitive
    Insurance Market
     A large number of buyers and sellers
     Sellers’ freedom of entry into and exist from
    the market
     Sellers produce identical products
     Buyers and sellers are well informed about
    the products and services
    Categories of Insurance market
    Imperfections
    Market
    imperfections

    Information Free
    Market Power Externalities
    problems Rider problems

    Barriers to Asymmetries Non existent


    Positive Negative
    Entry/exit Information information

    Economics of
    Lemons
    scale/scope

    Price Discrimination Adverse selection

    Product
    Moral Hazard
    Differentiations

    Principal agent
    problem
    Solutions to Asymmetric Information
     Educating/customer about
    -Insurance needs product features
    -Quality and prices of insurance policies
    -Financial health of the insurers
     Establishing stricter system of monitoring salesforce
     Conducting deeper investigations of claims.
    The human life value concept (HLV)
    HLV- a part of the general theory of human capital
    Human Capital - important element of nations wealth
    - Investments we made in one self with
    an expectation of future benefits.
    (Adam Smith)
    Gary S. Backer – 1991 Nobel awardee for Economics
    HLV – Capitalised monetary worth of the earning
    capacity resulting from the economic forces that
    we incorporated within our being
    - arises out of its relations to other lives
    - first applied in 1880, by Jakob L Green, President,
    Connecticut Mutual Life Insurance Co.
    - Subject to loss through (1) Premature death (2) Incapacity (3)
    retirement and (4) Unemployment
    HLV is a function of its purpose and
    value to others
    General standpoint – Present value of an

    individuals future net


    earnings-self maintenance
    costs
    Dependents standpoint - value of the benefits the
    dependents can expect
    Organizations standpoint – value of services to the firm
    THANK YOU

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