Insurance Sector

 Reforms initiated in the early 90’s have changed the face of
 the Indian econo...

                                                                   Major Life Insurers in India
economic progra...

Changes for fuelling competition         hold more than 5% in any company.              The insurance sector to...
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Bizness Insurance%20sector


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Bizness Insurance%20sector

  1. 1. Bizness Insurance Sector KenSource Reforms initiated in the early 90’s have changed the face of the Indian economic landscape resulting from a major shift in the development policy. As a part of the reforms programme, India opened up certain sectors of the economy that hitherto were the sole prerogative of the government. One of the most significant impacts of economic liberalisation and allowing private participation has happened in the Insurance sector. From a limited choice of one single insurance provider, consumers today can choose from a number of other private insurers to service their demands, and with a fast-changing demographics, it is one among the many sectors that is set to witness exponential growth in the years to come. Let’s peek into the past, present and future of this dynamic and all pervasive sector, but first the basics. A were consolidated to form the palmist may read back to the eighteenth century. It has your hand as per the actually come a full circle from being an Insurance Act in 1938 with an inexact science of open competitive market to being objective to protect the interests of the astrology, but, how accurately, is regulated and controlled exclusively by insuring public. anybody’s guess. So what’s the best the government and back to a liberalised The initial phases saw a mass way of beating an uncertain future? The regime again. proliferation of companies in the best bet to beat uncertain circumstances Life Insurance insurance business that increased the is to hedge oneself against the probable The sector is broadly divided into two risk of the insuring public and forced the risks of the future. In other words, to categories including Life and Non-life government to take over the business ensure against the uncertain future Insurance. The former encompasses the from the private sector. In 1956, about through some sort of mechanism and bulk of business but the non-life segment 245 Indian and foreign insurers and insurance is all about hedging oneself nevertheless is also as important. The provident societies were taken over by from the vagaries of an uncertain future. commencement of Life insurance in India the central government and nationalised. The term insurance is all-pervasive dates back to 1818 when the Oriental The LIC Act of 1956 laid the foundation in the sense that it enables one to Life Insurance Company in Calcutta for the creation of the Life Insurance protect everything from one’s life to the was established. The Indian Life Corporation of India (LIC), which today is one of the largest and the most smallest of assets that you can think of Assurance Companies Act was successful public sector enterprises in from the vagaries of an uncertain future. enacted as the first statute to regulate the country. LIC enjoyed a status of a Though the sector is being fancied of the life insurance business in India in the late on the Indian economic scene, year 1912. Later, as the sector grew in virtual monopoly till recently when the insurance business in India per se dates importance, all the acts formed till date government, as part of its larger
  2. 2. Bizness Major Life Insurers in India economic programme of allowing private participation, again decided to open the Insurance Sector to the private players. Allianz Bajaj Life Insurance Co. Ltd. AMP Sanmar Assurance Company Limited General Insurance Birla Sun Life Insurance Co. Ltd. The Triton Insurance Company Limited parented the general Dabur CGU Life Insurance Company Pvt. Ltd insurance business in India. It was the first general insurance HDFC Standard Life Insurance Co. Ltd. company established in 1850 by the British in Calcutta. In ICICI Prudential Life Insurance Co Ltd. 1907 came The Indian Mercantile Insurance Ltd which ING Vysya Life Insurance Co. Pvt. Ltd. transacted all classes of general insurance. This sub-segment Life Insurance Corporation of India too was nationalised in 1972 having passed the General Max NewYork Life Insurance Co. Ltd. Insurance Business (Nationalisation) Act. This saw the MetLife India Insurance Company amalgamation of 107 insurers under a group of 4 companies OM Kotak Mahindra Life Insurance Co. Ltd. namely; the National Insurance Company Ltd., the New India SBI Life Insurance Company Ltd. Assurance Company Ltd., the Oriental Insurance Company Ltd. Tata AIG Life Insurance Co. Ltd. and the United India Insurance Company Ltd. LIC in life insurance and GIC in general insurance with its subsidiaries had for long been monopoly players in the insurance sector. Of late, however, with the setting up of the Insurance Regulatory and Development Authority (IRDA), the government has once again de-regulated the sector opening it for private players. With this, many large Indian business houses along with other multinational players have setup shop for selling insurance services in India. Insurance sector reforms Major Non-Life Insurers in India As part of the liberalisation process, the government appointed a committee headed by the former Finance Secretary Bajaj Allianz General Insurance Co. Ltd. and RBI governor, Mr. R N Malhotra, to evaluate the insurance Cholamandalam General Insurance Co. Ltd. industry and to recommend its future direction. This HDFC Chubb General Insurance Co. Ltd committee, in its report submitted in 1994, suggested the ICICI Lombard General Insurance Co. Ltd. following changes: IFFCO TOKIO General Insurance Co. Ltd. National Insurance Company Ltd. Structural Changes New India Assurance Company Ltd. quot; Government stake in Insurance companies be brought down Oriental Insurance Company Ltd. to 50%. Reliance General Insurance Co. Ltd. quot; The holdings of GIC and its subsidiaries be taken over in Royal Sundaram General Insurance Co. Ltd. order to facilitate their functioning as independent Tata AIG General Insurance Co. Ltd. corporations. United India Insurance Company Ltd. quot; Greater freedom of operation for all the Insurance companies.
  3. 3. Bizness Changes for fuelling competition hold more than 5% in any company. The insurance sector today offers a quot; Allowing private enterprise in the Their current holding will be brought host of job opportunities especially for sector with companies with a paid-up down to this level over a period of time. those with a finance background and capital of a minimum of Rs.100 crore. particularly so for marketing specialists, The Insurance Regulatory and quot; No single entity to function in both finance experts, human resource Development Authority (IRDA) Life and General Insurance segments. professionals, engineers from diverse The insurance sector began its quot; Foreign companies to be allowed only streams like the petrochemical and reforms process with the passage of the in combination with an Indian partner. power sectors, systems professionals, IRDA bill in parliament in December quot; Postal Life Insurance to be allowed statisticians and even medical 1999. Since its incorporation as a in rural markets. professionals. The demand for under- statutory body in April 2000, IRDA has quot; Only one state level Life Insurance writers claims management and been working towards the framing and Company to be allowed in each state. actuaries is also rising by the day. implementation of the various regulatory Regulatory Changes measures for the smooth working of the Systems professionals especially quot; Changes to be made to the Insurance industry. That apart, one of the most would be required to generate the MIS Act. important initiative of the IRDA was the (Management Information Systems), to quot; An independent Insurance regulatory launching of IRDA’s online service for help the organisations in decision-making authority to be set up. issue and renewal of licenses to agents. and product pricing. Also needed would Moreover, the approval of institutions Investments be advertising and sales promotion for imparting training to agents has also quot; Reduction in the mandatory people for image-building exercises. ensured that the insurance companies investments of LIC Life Fund in Along with the regular jobs, a range would have a trained workforce of government securities to be brought of professionals linked with the sector insurance agents in place to sell their down from 75% to 50%. will be required and that will include products. quot; GIC and its subsidiaries are not to sales agents and independent claims Following the various adjusters who will bring new recommendations over the opportunities to the surveyors. past couple of years, a host Opportunities will be created for those of Indian companies have who are already working in the industry entered the sector with to upgrade their skills. major foreign companies as their partners. Kotak The insurance industry in India in its Mahindra has tied up with new form is in its initial stages of Chubb, SBI with Alliance development. However, considering the capital, IDBI with Principal pace at which things are moving, it will and Tata group with AIG. soon come to be recognised as one of All these add up to new the most vital segments of the economy. products, better packaging, Proper regulatory framework and a improved customer service backyard support of the government and, most importantly, would see this sector develop as a major greater employment area in a short time. opportunities.