Three Questions about Insurance Liberalization
Three key, questions that impinge on liberalization of insurance business in India. Are: why liberalize, what market structure to have finally, what role for regulator
Introduction
The decision to allow private companies to sell insurance products in India rests with the lawmakers in Parliament. Opening up the insurance sector requires crossing at least two legislative hurdles. These are the passage of the Insurance Regulatory Authority (IRA) Bill, which will make IRA a statutory regulatory body, and amending the LIC and GIC Acts, which will end their respective monopolies.
In 1994 the government appointed a committee on insurance sector reforms (which is known as the Malhotra Committee) which recommended that insurance business be opened up to private players and laid down several guidelines for orchestrating the transition.
In particular, we do not address many other related questions such as whether foreign (and not just private) players should be allowed, what cap should there be on foreign equity ownership, whether banks and other financial institutions should be allowed to operate in the insurance business, whether firms should be allowed to sell both life and -non-life insurance, and so on.
The three questions that we address are
(a) Why should insurance be opened up to private players?
(b) If opened up, what should be the appropriate market structure (many unregulated players or
a few regulated players); and finally,
(c) What is the role of the regulator in insurance business?
Three key, questions that impinge on liberalization of insurance business in India. Are: why liberalize, what market structure to have finally, what role for regulator
Introduction
The decision to allow private companies to sell insurance products in India rests with the lawmakers in Parliament. Opening up the insurance sector requires crossing at least two legislative hurdles. These are the passage of the Insurance Regulatory Authority (IRA) Bill, which will make IRA a statutory regulatory body, and amending the LIC and GIC Acts, which will end their respective monopolies.
In 1994 the government appointed a committee on insurance sector reforms (which is known as the Malhotra Committee) which recommended that insurance business be opened up to private players and laid down several guidelines for orchestrating the transition.
In particular, we do not address many other related questions such as whether foreign (and not just private) players should be allowed, what cap should there be on foreign equity ownership, whether banks and other financial institutions should be allowed to operate in the insurance business, whether firms should be allowed to sell both life and -non-life insurance, and so on.
The three questions that we address are
(a) Why should insurance be opened up to private players?
(b) If opened up, what should be the appropriate market structure (many unregulated players or
a few regulated players); and finally,
(c) What is the role of the regulator in insurance business?