The document discusses the history and liberalization of the insurance sector in India. It outlines key events such as the nationalization of insurance in 1956 and the establishment of regulatory bodies like the Insurance Regulatory and Development Authority (IRDA) in 1999. The Malhotra Committee in 1993 recommended allowing private companies and foreign investments in insurance and reducing government stakes in insurance companies. This led to opening up the insurance sector and allowing greater private sector participation.

1. Liberalisation of
insurance services
Presented by,
Vishnu Thankachan
S3, MBA
NO. 029

2. Meaning of Insurance
 Insurance is a policy from a financial institution that offers a person, company, or
other entity reimbursement or financial protection against possible future losses or
damages.
 Precautionary measure against future contingent losses.

3. A brief history of the Insurance sector
The life insurance business in India
 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.

4. The general insurance business in India
 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
 1957: General Insurance Council, a wing of the Insurance Association of India,
frames a code of conduct for ensuring fair conduct and sound business practices.
 1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.
 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.
 107 insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.

5. The Need For Raising FDI limit.
 Higher FDI in insurance sector can give much needed capital
for growth of insurance sector which in turn will help in the
long term economic development.
 Ambitious infrastructure projects of Government can get
stable long term source of funds.
 Higher amount of FDI in insurance would increase penetration
of insurance in India which is low compared to global average.
 An increase in FDI in insurance will benefit the economy as
people will invest in long term fund which will increased the
growth of economy.
 Insurance in India is mainly confined to urban sector Vast
potentials are lying untapped

6. Insurance liberalization process in India
Insurance Regulatory and Development Authority
Act, 1999.
This along with amendments to the Insurance Act
1983, LIC and GIC Acts paves the way for the entry of
private players and possibly the privatization of the
hitherto public monopolies LIC and GIC.

7. Liberalization of Insurance
The comprehensive regulation of insurance business
in India was brought into effect with the enactment
of the Insurance Act, 1983.
The Government of India in 1993 had set up a high
powered committee by R.N.Malhotra

8. Malhotra Committee
 The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector.
 The reforms were aimed at "creating a more efficient and
competitive financial system suitable for the requirements of
the economy keeping in mind the structural changes currently
underway and recognizing that insurance is an important part
of the overall financial system where it was necessary to
address the need for similar reforms…"

9. Structure
 Government stake in the insurance Companies to be brought
down to 50%.
 All the insurance companies should be given greater freedom
to operate.

10. Competition
 Private Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the industry.
 No Company should deal in both Life and General Insurance through a
single entity.
 Foreign companies may be allowed to enter the industry in collaboration
with the domestic companies.
 Postal Life Insurance should be allowed to operate in the rural market.

11. Regulatory Body
 The Insurance Act should be changed.
 An Insurance Regulatory body should be set up.
 Controller of Insurance (Currently a part from the Finance
Ministry) should be made independent.

12. Investments
 Mandatory Investments of LIC Life Fund in government
securities to be reduced from 75% to 50%.
 GIC and its subsidiaries are not to hold more than 5% in any
company

13. 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.

14. IRDA Act, 1999
 Preamble of IRDA Act 1999 reads 'An Act to provide for the
establishment of an authority to protect the interests of
holders of insurance policies, to regulate, to promote and
ensure orderly growth of the insurance industry and for
matters connected therewith or incidental thereto.
 Section 14 of IRDA Act, lays the duties, powers and functions
of the authority.

15. Current Scenario
After opening up of insurance in private sector,
various leading private companies including joint
ventures have entered the fields of insurance both
life and non-life business.