General Insurance Corporation of India


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Case Details:

Case Code : BSTR111
Case Length : 31 Pages
Period : 1992 - 2002
Organization : General Insurance Corporation of India
Pub Date : 2002
Teaching Note :Not Available
Countries : India
Industry : Insurance

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS Contd...

Globalization

In December 1987, GIC, along with its subsidiaries set up a subsidiary in Singapore, known as India International Pte. Ltd. with a paid-up capital of S$25 million. It offered a wide range of insurance policies including those for motor, marine hull and cargo, personal accident, workmen's compensation, public liability, fire and miscellaneous accidents. India International became a leading insurance company in Singapore. During the same period, GIC also set up The New India Assurance Company (Sierra Leone) Limited and The New India Assurance Company (Trinidad & Tobage) Limited.

Human Resources

GIC's employees were grouped as Class I, II, III and IV. The officers were the Class I employees, development officers were the Class II emloyees, clerical and supervisory staff were the Class III employees, and subordinate staff were the Class IV employees. In 1997, a new wage revision policy was proposed and two new practices were introduced - 12% wage hike for all, and concept of Productivity Linked Lumpsum Incentive (PLLI). Prior to the implementation of this wage revision policy, the wages for the employees were revised in accordance with the wage revision for the banking industry. The new wage revision took place once in every five years.

Social Responsibility

The provision of social security was a responsibility of the State, as per the Schedule 7 of the Constitution of India. The laws passed by the State to serve the purpose included the use of insurance - compulsory or voluntary - as a security tool. The Employees State Insurance was one such scheme, which took care of the expenses incurred due to sickness, disablement, maternity and death, for the benefit of industrial employees and their families. Insurers played an important role in the social security schemes sponsored by the GOI. The Insurance Act, 1938, made it mandatory for insurance companies to offer a percentage of business to the people in the rural sector. They had to offer insurance to workers in the unorganized sectors, economically backward classes of the society and other categories listed by the IRDA...

Finance

In 2001, GIC and its subsidiaries reported a total loss of Rs 17.22 billion as compared to the losses of Rs 12.14 billion in 2000, and Rs 6.87 billion in 1999. The net premium from fire insurance business stood at Rs 21.50 billion compared to Rs 24.04 billion in 2000. The net premium from marine insurance business stood at Rs 8.28 billion as against Rs 8.46 billion in 2000. The motor insurance business reaped a total premium amounting to Rs 33.62 billion in 2001 and Rs 23.17 billion in 2000...

Future Outlook

Analysts felt that GIC's future looked bleaker after the deregulation of the insurance industry in India. Competition was tougher in the general insurance segment, as compared to the life insurance segment. In life insurance, customers were locked in for life or at least for a minimum of 10 years. In general insurance, most of the policies were mandatory and had to be renewed annually. With the entry of private players and increasing competition, customers now had more choices and they had become highly price sensitive. They were not loyal to any specific company. Moreover, switching from one company to another did not involve any cost or inconvenience. In addition, building trust was not considered very important in this segment...

The Indian General Insurance Industry

In the 1970s, the general insurance industry was nationalized in order to increase the penetration of insurance in the country and make it available to the lower segments of the society, particularly the rural population. However, even after 40 years of nationalization, only 25% of the insurable population was covered by insurance. This was one of major reasons that lead the GOI to liberate this sector, so that private players could work towards extending the reach and coverage of insurance across the country.

Exhibits

Exhibit I: Some of the Popular Products of GIC
Exhibit II: NIAC's Global Operations
Exhibit III: The Farmers' Package Insurance
Exhibit IV: The Tribal Package Insurance
Exhibit V: Analysis of Profit/Loss in Underwriting Business of Insurance PSUs
Exhibit VI: Total Profit/Loss Of Insurance PSUs
Exhibit VII: About IRDA
Exhibit VIII: Profile of the Private Players in the Indian General Insurance Market

  

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