Pestel Analysis Of Icici Prudential Economics Essay

Threat of New Entrants. The common entrepreneur cant come along and start a huge insurance provider. The threat of new entrants sits within the insurance industry itself. Some companies have carved out niche market areas where they underwrite insurance. These insurance firms are fearful of being squeezed out by the top players. Another risk for many insurance companies is other financial services companies going into the marketplace.

Power of Suppliers. The suppliers of capital may not pose a large threat, but the threat of suppliers luring away human capital does. If a skilled insurance underwriter is working for a smaller insurance company (or one in a niche industry), there exists the chance see your face will be enticed away by bigger companies looking to move into a particular market.

Power of Clients. The average person doesn't pose much of a menace to the insurance industry. Large corporate clients have far more bargaining power with insurance companies. Large corporate clients like airlines and pharmaceutical companies pay huge amount of money per annum in premiums. Insurance companies try extremely hard to get high-margin commercial clients.

Availability of Substitutes. This one is pretty self-explanatory, for there are plenty of substitutes in the insurance industry. Most large insurance companies offer similar suites of services. Whether it is car, home, commercial, health or life insurance coverage, its likely that there are competitors that can offer similar services. In a few regions of insurance, however, the availability of substitutes is few and far between. Companies focusing on niche areas usually have a competitive benefits, but this gain depends entirely on the size of the topic and on whether there are any barriers preventing other businesses from stepping into.

Competitive Rivalry. The insurance industry is now highly competitive. The difference between one insurance provider and another is not often that great. As a result, insurance is becoming similar to a product - an area in which the insurance provider with the low cost structure, greater efficiency and better customer service will conquer out competitors. Insurance companies also use higher investment earnings and a variety of insurance investment products to try to lure in customers. In the long run, we're likely to see more consolidation in the insurance industry. Much larger companies would rather dominate or combine with others rather than spend the money to advertise and advertise to the people.

Pestel analysis

Political and legal factors

Within Indian political ambitions and climb of communalism, fissiparous tendencies are on the rise and may well continue for a long time. Based on this the insurance companies might introduce political risk coverage in their plans. In India the sole area where customers consider to a take insurance cover is on customs duty change but also on certain conditions. The term "political risk" has a wider connotation than commonly realized or assumed. It protects events rising not just from politics, but hazards in the course of international transactions. Predicated on this the insurance companies come up with new policies with regards to the problems arising out of international legal jurisdiction, political changes and also forex difficulties being encountered by many developing countries. Reforms in the Insurance sector were initiated with the passage of the IRDA Costs in Parliament in December 1999. The IRDA since its incorporation as a statutory body in Apr 2000 has fastidiously caught to its agenda of framing rules and registering the private sector insurance firms. In India the entrance mode for a company to start up a fresh life insurance company is to truly have a paid up capital of 100 crore rupees. Other rules received in by IRDA are Compulsory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% GIC and its own subsidiaries aren't to carry more than 5% in any company (There current holdings to be brought right down to this level over a period)

Economic Factors

The rates of interest at bank and also the provident fund deviation affect the life span insurance industry as people are always enticed by an increased return. So compared to this the lower return insurance policy is not attractive to the customers. Another factor which influences the life span insurance industry is Unemployment, as unemployed people wouldn't normally have any cash flow, savings would be relatively less which means less sales in-turn affecting the GDP of the united states and also the industry. Other factors which contribute to the insurance industry will be the natural factors like earthquakes, monsoons etc, as these incidents lead to a lot of deaths, the insurance firms have to pay claim contrary to the policy. A typical Indian will want a much better product with a minimal income so he prefers to pay in annuity or installments (EMI), in order that they will not have extra savings to invest in the insurance coverage.

One of the key reasons for the economic factor is the inflation rate nowadays. High inflation rate will have a tendency to reduce the insurances' business as the money paid to the insurance plan holder before maturity will be less and it would be less attractive for the trader.

Social-cultural factors

Population is one of the major factors impacting on the industry as the progress in people will indirectly help the firms to capture more market with an increase of people. Life-style is another factor which have an impact on the industry, the current life-style of people in India are becoming increasingly like nuclear individuals, as both parents would be working there will be a possibility of an accident, which means increased sales for the company In conditions of life insurance. Similarly people are interested in having an automobile and more vehicles in the road would mean more sales forever insurance. The third factor is the level of education, as India is still a growing country more than 50% of the population is illiterate and the other 50% aren't sure about the concept of life insurance, creating the understanding for the product is a big challenge and one of the more contributing factors that influence the life insurance industry.

Technological Factors

Internet is now a fast house maintain name in India where every house in the metropolitan area has an association. The life insurance industry has considered good thing about this with having many procedures which may be flexible to the customer. The client can check the flexibility resting at home and select the best insurance plan, pay the monthly installments and everything would be achieved within minutes. Yet another factor is the debit and credit-based card facilities where the customer can pay the installments easily. The life span insurance industry is taking a huge benefit of the technology progress on earth and rendering it their competitive advantages.

Environmental factors

Insurance companies in India are more affected by environmentally friendly factors which can affect the industry. The Tsunami in 2008 which acquired such an impact in the south - european India,

Drivers of growth in the insurance industry.

Government support

The existing rule based on the IRDA in India is a foreign partner can take no more than 26% of equity in an insurance company. Countering this a proposal has been submitted to the government to increase the limit to 49% which means additional money to be pumped in the market. In 1999, a complete of Rs. 8. 7 billion has been given by the foreign lovers and 21 private companies have been awarded licenses.


The powerful rivalry on the list of players in the life span insurance market is going to have an effect on the industry in a positive way. LIC which has the most market show is showing signals of sacrificing their grasp in your competition and other companies like ICICI prudential, Metlife India are increasing.

Legal aspects

The insurance industries growth is more than three times the progress of its market in India. A lot of businesses or the domestic firms will try to invest in insurance sector. Moreover, the progress of insurance in India is 13 times more than the expansion of insurance industry in the developed countries. So foreign companies will be fostering an huge desire to invest in the Indian insurance market.

Industry life cycle model

Source: (Johnson, et al. 2005)

The theory for the Industry Life cycle is given in the Appendix. Analysing the life span insurance industry in India the main element observations are, the Industry is in the shake-out level relating to the porters 5 pushes analysis we can evaluate that the accessibility into the market is difficult and there is immense competitive rivalry on the market and the companies are innovating with many flexible policies to suit the potential customer. Today's market players like LIC, ICICI Prudential, Metlife India insurance are experiencing a solid Managerial and Budget, they can handle holding the market which in today's market scenario is an integral to possessing customers so the weak companies are not able to cope up with this situation and are either being bought out by the big companies or they are simply just stepped on.

Scenario 1


In the near future we might visit a great deal of companies merging in order to contend with LIC which includes about 68% of the market share. The next major company positioning the marketplace is ICICI Prudential with 8% which is also a jv between ICICI Loan company and Prudential life insurance coverage.

The difference between the top two companies is 60%. Which can even be told as a monopoly by LIC. As the insurance industry is one of the very most emerging on the globe many companies want to contend for the marketplace talk about. Given the circumstance, the only real weakness that LIC has is their customer romantic relationship management, others have made that area their strongest.

Taking into consideration one of the individuals for change that is mentioned above, which says that the federal government might boost the limit of foreign companies' equity to 49%, there are numerous opportunities for the joint projects to happen. Few companies have already established themselves on the market like AIG with Tata, ING with Vyasaya.

Scenario 2

Life Insurance becoming more tech-savvy.

Another scenario is the fact that the life insurance firms make trading online for the customers. That's make everything available in the internet for the clients like paying of superior, deciding on the best procedures etc.

ICICI Prudential has tried its hand at the technology giving more information about their guidelines and services they offer to the customers where in fact the customers can check and enquire anything they would like to know. That is one of the stepping stones to the technology of having everything electronic where the customer will not be harnessed to the newspaper work of having a life insurance coverage.

Many other companies have taken after this area and soon it will be a boon to the clients.

Scenario 3

Life insurance as expansion of the economy

Since India's life insurance industry liberalized in 1999, there have been companies coming to India and with it increasing your competition, the innovation, the flexibilities etc. Insurance industry's contribution to the GDP has more than doubled from 2. 3% in 2001 to 5. 2% in 2011. The Life insurance masks have increased about 12times in the past decade and several analysts forecast that by 2020 India will be one of the three top countries in the insurance market. The figures say that the insurance industry will reach upto $350-$400 billion by 2020. (Analysis of insurance sector, 2011)

http://www. subramoney. com/2010/03/changing-scenario-in-the-life-insurance-industry/

http://www. unepfi. org/fileadmin/documents/insurance_climatechange_statement. pdf

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