A.1 About The Insurance Sector in India
A.1 About The Insurance Sector in India
A.1 About The Insurance Sector in India
Historical Perspective
In 1818 it was conceived as a means to provide for English Widows. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization.
1912:
The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928:
The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938:
Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956:
245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crores from the Government of India.
than 5% in any company (there current holdings to be brought down to this level over a period of time) v) Customer Service: LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body- The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage 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 framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.
Present Scenario
The Government of India liberalised the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 15 life insurance companies have been registered. A host of private Insurance companies operating in life segments have started selling their insurance policies since 2001. Table shows the current market players in the life Insurance Industry (Source IRDA). Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 Name of the Company Bajaj Allianz Life Insurance Co. Limited Birla Sun Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd ING Vysya Life Insurance Co. Ltd. Life Insurance Corporation of India Max New York Life Insurance Co. Ltd Met Life India Insurance Co. Pvt. Ltd. Kotak Mahindra Old Mutual Life Insurance Ltd. SBI Life Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. Aviva Life Insurance Co. India Pvt. Ltd.
14 15 16
Sahara India Life Insurance Co. Ltd. Shriram Life Insurance Co. Ltd. Bharti AXA Life Insurance Co. Ltd.
30000 25002.45 25000 20431.82 20000 15000 10000 5000 0 Premium Collected till march 2007 Premium Collected till march 2006 8716.94 5434.73 16285.51 Gross Premium in Rs. Crore Private Total Gross Premium in Rs. Crore Public Total Gross Premium in Rs. Crore Total
14997.09
Innovative products, smart marketing and aggressive distribution. That's the triple whammy combination that has enabled fledgling private insurance companies to sign up Indian customers faster than anyone ever expected. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The growing popularity of the private insurers shows in other ways. They are coining money in new niches that they have introduced. The state owned companies still dominate segments like endowments and money back policies. But in the annuity or pension products business, the private insurers have already wrested over 33 percent of the market. And in the popular unit-linked insurance schemes they have a virtual monopoly, with over 90 percent of the customers. The private insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. For instance, the average size of
a life insurance policy before privatisation was around Rs 50,000. That has risen to about Rs 80,000. But a rejuvenated LIC is also trying to fight back to persuade new customers.