14-04-2014, 12:46 PM
Research Paper on Insurance in India
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ABSTRACT
The insurance business is complex whether one is a Life Insurer, a General Insurer, a Re-insurer or an Insurance Brokerage house. Taking the complexity of the industry into account one has to invest a great deal in understanding such business. In insurance and risk management, the specialist helps in identifying, evaluating, reducing and managing risk in all the countries that one does business.
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. The risk, which can be insured against include fire, the peril of sea, death, incident, & burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved.
Insurance is actually a contract between 2 parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party happening of a certain event. Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events. With the help of insurance, large number of people exposed to a similar risk makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good.
INTRODUCTION
Insurance is basically risk management device. The losses to assets resulting from natural calamities like fire, flood, earthquake, accident etc. are met out of the common pool contributed by large number of persons who are exposed to similar risks. This contribution of many is used to pay the losses suffered by unfortunate few. However the basic principle is that losses should occur as a result of natural calamities or unexpected events which are beyond the human control. Secondly insured person should not make any gains out of insurance.
It is natural to think of insurance of physical assets such as motor car insurance or fire insurance but often be forget that creator all these assets is the human being whose effort have gone along way in building up to assets. In that scene human life is a unique income generating assets. Unlike physical assets which decreases with the passage of time. The individual become more experience and mature as he advances in age. This raises his earnings capacity and the purpose of life insurance is to protect the income to individual and provide financial security to his family which is dependent of his income in the event of his pre mature death. The individual also himself also himself also needs financial security for the old age or on his becoming permanently disabled when his income will stop. Insurance also has an element of saving in certain cases.
INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.
HISTORY OF INSURANCE SECTOR
The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta.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 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 nationalized. LIC formed by an Act of Parliament, viz.
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.
OBJECTIVE OF INSURANCE COMPANY
The main objective of the Insurance company is that they provide liability of difficulties that are faced in business as well as in life. In India most of Indians have the security life policy in Life Insurance Corporation of India. It provides enough needs according to the customers expectation.
Insurance companies take risks based upon actuaries who uses statics to determine overall exposure on a policy. Once your company determine its risk they write a policy and calculate your premium. They also outlines what is not insured. premiums are collected from insured parties.
INSURANCE SCOPE IN INDIA
Insurance is a nice-looking option for investment but most people are not aware of its advantages as an investment option. Remember that foremost and first, insurance is about risk cover and protection. By buying life insurance, you buy peace of mind. Insurance also serves as an excellent tax saving mechanism. The Government of India has provided tax incentives to life insurance products in order to facilitate the flow of funds into productive assets.
The insurance sector has opened up for private insurance companies with the enactment of IRDA Act, 1999. A large number of companies are competing under both general and life Insurance. The FDI cap/equity in this sector is 26% and the proposals have to be cleared by Insurance Regulatory and Development Authority (IRDA) established to protect the interest of holder of Insurance policy and act as a regulator and facilitator in the industry.
CONCLUSION
India is among the important emerging insurance markets in the world. Life insurance will grow very rapidly over the next decades in India. The major drivers include sound economic fundamentals, a rising middle-income class, an improving regulatory framework and rising risk awareness. The fundamental regulatory changes in the insurance sector in 1999 will be critical for future growth.
Despite the restriction of 26% on foreign ownership, large foreign insurers have entered the Indian market. State-owned insurance companies still have dominant market positions. But, this would probably change over the next decade. In the life sector, new private insurers are bringing in new products to the market. They also have used innovative distribution channels to reach a broader range of the population.