Pestel Analysis Of Icici Prudential Economics Essay

Pestel Analysis Of Icici prudent Economics Es tellThreat of New Entrants. The fairish entrepreneur potbellyt come along and start a deep indemnification gild. The threat of new entrants lies within the indemnity indus try out itself. several(prenominal)what companies have carved out receding aras in which they underwrite indemnity policy. These insurance companies atomic number 18 fearful of being squeezed out by the cosmic players. some former(a) threat for m either insurance companies is separate financial services companies go into the mart.Power of Suppliers. The suppliers of capital force non pose a gravid threat, but the threat of suppliers luring away human capital does. If a able insurance underwriter is working for a smaller insurance follow (or one in a niche attention), there is the chance that psyche volition be enticed away by larger companies looking to force out into a particular grocery store.Power of Buyers.The individual doesnt pose much of a threat to the insurance industry. Large corpo direct clients have a component much bargaining power with insurance companies. Large corporate clients equal airlines and pharmaceutical companies pass on millions of dollars a year in premiums. insurance policy companies try extremely hard to get high-margin corporate clients.Availability of Substitutes.This one is beauteous straight forward, for there ar plenty of substitutes in the insurance industry. close to large insurance companies offer similar suites of services. Whether it is auto, home, commercial, health or smell insurance, chances be there ar competitors that can offer similar services. In some areas of insurance, however, the availability of substitutes isfew and far mingled with. Companies focusing on niche areas usually have a competitive payoff, but this advantage depends but on the size of the niche and on whether there are any barriers preventing opposite firms from entering.Competitive Rivalry.Th e insurance industry is be approach path highly competitive. The engagement between one insurance telephoner and a nonher is usually non that great. As a result, insurance has become to a greater extent like a commodity an area in which the insurance company with the low live structure, greater efficiency and let out customer service will bind out competitors. Insurance companies also use higher investment returns and a variety of insurance investment products to try to lure in customers. In the long run, were likely to see to a greater extent(prenominal) consolidation in the insurance industry. Larger companies prefer to take over or merge with other companies rather than spend the money to market and advertise to pot.Pestel synopsispolitical and legal federal agentsWithin Indian political ambitions and rise of communalism, fissiparous tendencies are on the rise and may well continue for quite some time. Based on this the insurance companies might introduce political at tempt coverage in their policies. In India the only area where customers consider to a take insurance cover is on customs duty channelize but also on certain conditions. The term political risk has a wider connotation than commonly understood or assumed. It covers events rising not just from politics, but risks in the course of international transactions. Based on this the insurance companies come up with new policies with respect to the problems arising out of overseas legal jurisdiction, political changes and also currency exchange difficulties being approach by many developing countries. Reforms in the Insurance sector were initiated with the passing game of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of skeletal system regulations and registering the private sector insurance companies. In India the entry mode for a company to start up a new smell insurance company is to have a paying(a) up capital of coulomb crore rupees. different districts got in by IRDA are Mandatory Investments of LIC Life store tin in government securities to be reduced from 75% to 50% GIC and its subsidiaries are not to think more or less to a greater extent than 5% in any company (There current dimensions to be brought down to this level over a percentage point of time)Economic FactorsThe interest rates at bank and also the forethoughtful fund variation affect the life insurance industry as people are always attracted by a higher return. So compared to this the lower return policy is not attractive to the customers. Another means which affects the life insurance industry is Unemployment, as unemployed people would not have any earnings, savings would be comparatively less(prenominal) which would symbolize less sales in-turn bear on the GDP of the country and also the industry. Other federal agents which contribute to the insurance industry are the natural factors like earthquakes, monsoons etc, as these events lead to a lot of deaths, the insurance companies have to pay demand against the policy. A typical Indian will want a better product with a low income so he prefers to pay in annuity or installments (EMI), so that they will not have wasted savings to invest in the insurance policy.One of the main reasons for the frugal factor is the inflation rate in todays market. High inflation rate will tend to reduce the insurances business as the money paid to the policy holder during the time of maturity will be less and it would be less attractive for the investor.Social-cultural factorsPopulation is one of the major factors affecting the industry as the egress in population will indirectly help the companies to capture more market with more people. Life styles is some other factor which affect the industry, the current life styles of the people in India are increasingly becoming like nuclear families, as both the parents would be w orking there would be a possibility of an accident, which would mean more sales for the company In terms of life insurance. Similarly people are interested in having a car and more cars in the road would mean more sales for life insurance. The third factor is the level of education, as India is still a developing country more than 50% of the population is illiterate and the other 50% are not sure about the concept of life insurance, creating the awareness for the product is a big challenge and one of the more contributing factors that affect the life insurance industry.Technological FactorsInternet is becoming a fast house hold name in India where every house in the urban area has a connection. The life insurance industry has taken advantage of this with having many policies which can be ductile to the customer. The customer can tame the flexibility sitting at home and select the best policy, pay the monthly installments and everything would be done within minutes. One more factor is the debit and credit card facilities where the customer can pay the installments easily. The life insurance industry is taking a huge advantage of the engineering advancement in the world and making it their competitive advantage.Environmental factorsInsurance companies in India are more affected by the environmental factors which can affect the industry. The Tsunami in 2008 which had such an impact in the south westbound India,Drivers of growth in the insurance industry.Government supportThe existing rule according to the IRDA in India is that a foreign partner can hold a maximum of 26% of equity in an insurance company. Countering this a proposal has been submitted to the government to increase the limit to 49% which would mean more money to be pumped in the market. In 1999, a amount of money of Rs. 8.7 billion has been supplied by the foreign partners and 21 private companies have been minded(p) licenses.CompetitionThe intense rivalry among the players in the life insuran ce market is going to affect the industry in a positive way. LIC which has the closely market share is showing signs of losing their grip in the competition and other companies like ICICI prudential, Metlife India are gaining.Legal aspectsThe insurance sectors growth is more than 3 times the growth of its economic system in India. So many businesses or the domestic firms will aim to invest in insurance sector. Moreover, the growth of insurance in India is 13 times more than the growth of insurance industry in the developed countries. So foreign companies will be fostering an enormous desire to invest in the Indian insurance market. attention life cycle modelSource (Johnson, et al.2005)The theory for the Industry Life cycle is given in the Appendix. Analysing the life insurance industry in India the key observations are, the Industry is in the shake-out stage relating to the porters 5 forces analysis we can evaluate that the entry into the market is difficult and there is immense competitive rivalry in the industry and the companies are innovating with many flexible policies to suit the potential customer. The present market players like LIC, ICICI Prudential, Metlife India insurance are having a strong Managerial and Financial position, they are capable of retentivity the market which in the present market scenario is a key to holding customers so the weak companies are not able to cope up with this scenario and are either being taken over by the big companies or they are just run over.Scenario 1Joint-VentureIn the early we might see a lot of companies merging in site to compete with LIC which has about 68% of the market share. The next major company holding the market is ICICI Prudential with 8% which is also a peg venture between ICICI Bank and Prudential life Insurance.The difference between the top two companies is 60%. Which can also be told as a monopoly by LIC. As the insurance industry is one of the nearly emerging in the world many companies w ant to compete for the market share.Given the scenario, the only weakness that LIC has is their customer relationship management, other companies have do that area their strongest.Taking into consideration one of the drivers for change that is mentioned above, which says that the government might increase the limit of foreign companies equity to 49%, there are many opportunities for the joint ventures to happen. Few companies have already established themselves in the market like AIG with Tata, ING with Vyasaya.Scenario 2Life Insurance becoming more tech-savvy.Another scenario is that the life insurance companies make trading online for the customers. That is make everything on hand(predicate) in the internet for the customers like paying of premium, choosing the right policies etc.ICICI Prudential has tried its hand at the technology by giving more information about their policies and services they offer to the customers where the customers can check and wonder anything they wan t to know. This is one of the stepping stones to the technology of having everything electronic where the customer wont be harnessed to the paper work of having a life insurance.Many other companies have taken upon this area and soon it will be a boon to the customers.Scenario 3Life insurance as growth of the economySince Indias life insurance industry liberalized in 1999, there have been companies coming to India and with it increasing the competition, the innovation, the flexibilities etc. Insurance industrys contribution towards the GDP has increased significantly from 2.3% in 2001 to 5.2% in 2011. The Life insurance covers have increased about 12times in the past decade and Many analysts predict that by 2020 India will be one of the three top countries in the insurance market. The statistics say that the insurance industry will reach upto $350-$400 billion by 2020. (Study of insurance sector, 2011)Changing scenario in the life insurance industryhttp//www.unepfi.org/fileadmin/do cuments/insurance_climatechange_statement.pdf