Indian Insurance Industry
Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. Every practical and futuristic individual would want himself, his family and his assets to be insured. Insurance deals mainly with life and general insurance.
The business of life insurance started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. On the other hand The General insurance business started in India in the year 1850 with the establishment of Triton Insurance Company Ltd in Calcutta by the British
The insurance business is one of the most rapidly growing areas in the financial sector. With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It's a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the country's GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This it is an indicator that growth potential for the insurance sector is immense.
A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at the same time strengthens the risk taking ability. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country.
Present Scenario
The Government of India liberalized 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 demand for health insurance covers has seen a healthy increase, and today the sector is the fastest growing segment in the non-life insurance industry in India, which grew at over 40% last year. It is also emerging as an increasingly significant line of business for life insurance companies. Only about 25 million persons are presently covered for health through commercial insurance, in a country of over 1.1 billion people.
The general insurance industry grew 11.6 per cent in 2007-08 with fantastic performances by private players. The 13 non-life insurers collected US$ 4.7 billion in premium against US$ 4.2 billion in the same period last year. While the public sector could increase its premiums by just 3.57 per cent, 9 private sector players clocked premium growth of 26.49 per cent. Private sector players’ market share has grown to about 40 per cent in FY08 as compared to the public sector’s 60 per cent.
New players have contributed to the launch of innovative products, services and value-added benefits. Major foreign players have entered the country and announced joint ventures in both life and non-life areas. These include New York Life, Aviva, Tokio Marine, Allianz, Standard Life, Lombard General, AIG, AMP and Sun Life etc.
The domestic insurance industry in India is estimated to be around US$ 60.5 billion by 2010, of which US$ 35 billion will come from rural and semi-urban areas. While the life insurance market is expected to grow to US$ 35 billion, non-life insurance market will touch an estimated US$ 25 billion.
