annual report 2009-10 - IRDA

ANNUAL REPORT 2009-10I.3.33 With the focus shifting to other than metro andurban regions in the year 2009-10, majority of theoffices of life insurance companies [72.13 per cent(as against 71.32 per cent in 2008-09)], are locatedeither in semi-urban areas or in small towns, whichare not listed in HRA classification of the Ministry ofFinance. The break-up in favour of these areas isequally noticeable in case of both private sector andpublic sector life insurance companies.TABLE 16DISTRIBUTION OF OFFICES* OF LIFE INSURERS (as on 31 st March, 2010)Insurer Metro Urban Semi-urban Others TotalPrivate 897 1555 3607 2709 8768LIC 347 550 923 1430 3250Total 1244 2105 4530 4139 12018* Offices opened after seeking approval of the Authority.Note: 1) Data collected from life insurers through a special return.2) Based on the HRA classification of places done by the Ministry of Finance.Metro : Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore.Urban : A, B-1 and B-2 class cities of the HRA classification.Semi-urban : C class cities of the HRA classification.Others : Places not listed in the HRA classification.BOX ITEM 1PROFITABILITY OF LIFE AND NON-LIFE INSURERSThe nature of Insurance business is long-term and its profitability is a key issue, which depends upon manyfactors (such as interest rate fluctuations, observed mortality rates, lapse rates etc.) and is measureddifferently. With a lot of initial expenses, apart from the very nature of the business, insurance companiestake at least a few years’ time to reach the break-even point. Subsequent to the opening up of the insurancesector to private participation, the number of companies continues to grow. The number of companies,which have started making profits, is also increasing, although there is a delay in moving to positive territory,as against what was envisaged at the time of registration of the insurance companies with IRDA. A summaryof the profitability status of the insurance companies as at the end of 2009-10 is given below separately forlife and non-life companies.Life Insurance SectorDuring 2009-10, out of the 22 private life companies, seven revealed profit after tax as compared to four inthe previous two years. Out of the seven companies which reported profit in 2009-10 three companiesshowed profits continuously for the last two years. It is important to note that the life insurance sector iswitnessing an increasing number of companies which are entering the positive zone. Except for the newcomerswhose expense levels in the initial years are bound to result in sizeable losses, existing insurance companieswhich reported losses during the year, have been able to reduce the quantum of losses when compared tothat incurred in the previous year. The sector has been able to recover from the impact of global meltdownof the previous year (which resulted in a mere growth rate of 10.15 per cent) and has recorded a growth of19.69 per cent during the year. Additional capital that has been injected into the industry in 2009-10 was`2,766 crore. But, for most of the companies the expected break-even point has shifted forward as comparedto what was envisaged at the time of their application for licence to underwrite insurance business inIndia. Many companies achieved their targets (as set out at the licensing stage) in terms of premium income.Although this is a welcome sign, this has its own attendant problems. Along with the premium growth,companies had to invest in expanding their branch network and to augment their policy administration21