RESEARCH PAPER ECONOMICS VOLUME : 1/ISSUE : 4/ JULY 2013/ ISSN 2320 - 7620

Insurance Sector in India:

An Overview
KEYWORDS Regulatory role, Business Growth, Business Potential, Threat to public sector insurance companies.
NISHA K. SHARMA
Ph.d Scholar (KSV University)
ABSTRACT
India insuranceis a flourishing industry, with several national and international players competing and growing at rapid
rates. Thanks to reforms and the easing of policy regulations, the Indian insurance sector been allowed to flourish, and
as Indians become more familiar with different insurance products, this growth can only increase, with the period from
2010 - 2015 projected to be the Golden Age for the Indian insurance industry. Together with banking services, it
contributes to about 7 per cent to the countrys GDP. This lifted entry restrictions for private players and allowed
foreign players to enter the market with some limits on direct foreign ownership. There is a 26 percent equity cap for
foreign partners in an insurance company and a proposal to increase this limit to 49 percent. The opening up of the
insurance sector has led to rapid growth of the sector. The potential for growth of insurance industry in India is immense
as nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance
continues to be well below international standards. The insurance sector in India has come up with a full circle from
being an open competitive market to nationalization and back to a liberalized market again.

INTRODUCTION
The Insurance sector inIndiagoverned by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General
Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and
other related Acts. With such a large population and the untapped market area of this population Insurance happens to be
a very big opportunity inIndia. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with
banking services, it adds about 7 per cent to the countrys GDP .In spite of all this growth the statistics of the penetration
of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the
Health insurance. This is an indicator that growth potential for the insurance sector is immense inIndia. It was due to this
im mense growth that the regulations were introduced in the insurance sector and in continuation
MalhotraCommitteewas constituted by the government in 1993 to examine the various aspects of the industry. The
key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more
efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this
reform.
INSURANCE MARKET- PRESENT :
The insurance sector was opened up for private participation four years ago. For years now, the private players are
active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence
of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed
joint venture partnering well recognized foreign players across the globe. There are now 29 insurance companies
operating in the Indian market 14 private life insurers, nine private non-life insurers and six public sector companies.
There is pressure from both within the country and outside on the Government to increase the foreign direct investment
(FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion.There are
opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60
receive pensions. The IRDA has issued the first licence for a standalone health company in the country as many more
players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players
enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow
players to develop and price products for larger segments of society.

INSURANCE SECTOR REFORMS:

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N. Malhotra was formed to evaluate
the Indian insurance industry and recommend its future direction. 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 In 1994, the committee submitted the report.The Authority has notified 27 Regulations
on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance,
Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders
interest etc. Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance
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 RESEARCH PAPER VOLUME : 1/ISSUE : 4/ JULY 2013/ ISSN 2320 - 7620
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, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the
Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the
first general insurance company established in the year 1850 in Calcutta by the British.

INSURANCE SECTOR OVERVIEW: STATUS AND GROWTH

After privatization, insurance industry has seen significant growth. Due to low penetration and huge potential, many
foreign and domestic players have entered the sector. Moreover, several reforms and policy measures have provided a
favorable environment for insurance companies to flourish in the country.
The insurance sector in India is primarily divided into life and non-life, apart from a very small segment comprising re-
insurance. Both the life and non-life insurance segments, which were nationalized in the 1950s and 1960s, respectively,
witnessed an across-the-board liberalization process in 2000. After the reforms, the number of players has increased
from one in life insurance and four in non-life insurance in 2000 to 23 players in each segment till May 2010 (including one
re-insurer in the non-life segment) (as per the IRDA website).
The reasons for the strong foundation for insurance services in India are: growing middle class segment, rising incomes,
increasing awareness of insurance, as well as investments and infrastructure spending.
GROWTH IN TOTAL INSURANCE PREMIUMS
Strong economic growth of India has led to increased penetration of insurance in the country. Premium income as a
percentage of GDP has increased from 3.3% in FY03 to 7.6% in FY09. However, the penetration level is still low as
compared to other developed and developing economies. Many foreign companies have shown an interest in investing in
Indian insurance companies, in spite of the FDI limit, which is fixed at 26% for the life and non-life sectors.
The Life Insurance Council has projected 18% growth in total premium income for the life insurance industry in the financial
year 2009-10.
Although final figures, released by the Insurance Regulatory Development Authority, are being compiled, Life Insurance
Council secretary general SB Mathur told The Economic Times in April 2010 in an interview: During 2008-09, the life
insurance segment had mopped up a first premium income of Rs 88,000 crore while in 2009-10, there was an approximately
10-12% growth, which means that first premium income in the year just gone by is expected to be around Rs 1 lakh crore.
According to data released by the Insurance Regulatory Development Authority for 2008-09, total accumulated losses
stood at Rs 14,421 crore while the total equity infused by all companies put together was Rs 18,253 till March 2009.
Table - 1

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MARKET SHARE OF INDIAN INSURANCE INDUSTRY
The introduction of private players in the industry has added value to the industry. The initiatives taken by the private
players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the
advent of the private players in the market the industry has seen new and innovative steps taken by the players in this
sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen
the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the
75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC
in the near future. LIC market share has decreased from 95% (2002-03) to 81 %( 2004-05).

INDIA IN THE INTERNATIONAL CONTEXT :

The Indian insurance market is the 19th largest globally and ranks 5th in Asia, after Japan, South Korea, China and Taiwan.
In 2003, total gross premiums collected amount to USD 17.3 billion,representing just under 0.6% of world premiums. Similar
to the pattern observed in other regional markets, and reflecting the countrys high savings rate, life insurance business
accounted for 78.5% of total gross premiums collected in the year, against 21.5% for non-life insurance business.
Table 2 Major Players in the Insurance Sector Today
S.No. Date of Reg. Name of theCompany
1 23.10.2000 HDFCStandard Life InsuranceCompany Ltd.
2 23.10.2000 Royal SundaramAlliance Insurance CompanyLimited
3 23.10.2000 RelianceGeneral InsuranceCompanyLimited.
4 15.11.2000 Max NewYorkLife Insurance Co. Ltd.
5 24.11.2000 ICICI Prudential Life Insurance CompanyLtd.
6 04.12.2000 IFFCOTokio General Insurance Co. Ltd
7 10.01.2001 KotakMahindraOld Mutual LifeInsurance Limited
8 22.01.2001 TATAAIGGeneral InsuranceCompanyLtd.
9 31.01.2001 Birla Sun Life Insurance Company Ltd.
10 12.02.2001 Tata AIGLifeInsurance Company Ltd.
11 30.03.2001 SBI Life Insurance CompanyLimited.
12 02.05.2001 Bajaj Allianz General InsuranceCompanyLimited
13 02.08.2001 INGVysya Life Insurance CompanyPrivate Limited
14 03.08.2001 ICICI Lombard General Insurance Company Limited.
15 03.08.2001 Bajaj Allianz LifeInsurance Company Limited
16 06.08.2001 Metlife India InsuranceCompanyPvt. Ltd.
17 03.01.2002 AMPSanmar Life Insurance Company Limited.
18 14.05.2002 AvivaLife InsuranceCo. India Pvt. Ltd.
19 15.07.2002 CholamandalamGeneral Insurance CompanyLtd.
20 27.08.2002 Export Credit Guarantee Corporation Ltd.
21 27.08.2002 HDFC-Chubb General Insurance Co. Ltd.
22 06.02.2004 Sahara India Insurance CompanyLtd.
23 17.11.2005 ShriramLife Insurance Company Ltd.

CONCLUSION:
Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy
matures and the wealth of the middle classes increases. The most common types include: term life policies, endowment
policies, joint life policies, whole life policies, loan cover term assurance policies, unit-linked insurance plans, group
insurance policies, pension plans, and annuities. General insurance plans are also available to cover motor insurance,
home insurance, travel insurance and health insurance.Due to the growing demand for insurance, more and more
insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several
international leaders in the insurance sector are trying to venture into the India insurance industry.

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Useful Websites:
14. http://www.lic.wwindia.com/ 15. http://www.asiainsurancereview.com/edsynopsis.asp
16. www.hc.wharton.upenn.edu/impactconference/presentations.html

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