21-08-2012, 01:01 PM
The Indian Insurance Industry
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India insurance is 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 industy.
India Insurance Policies at a Glance
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.
India Insurance: History
The history of the Indian insurance sector dates back to 1818, when the Oriental Life Insurance Company was formed in Kolkata. A new era began in the India insurance sector, with the passing of the Life Insurance Act of 1912.
The Indian Insurance Companies Act was passed in 1928. This act empowered the government of India to gather necessary information about the life insurance and non-life insurance organizations operating in the Indian financial markets.
The Triton Insurance Company Ltd formed in 1850 and was the first of its kind in the general insurance sector in India. Established in 1907, Indian Mercantile Insurance Limited was the first company to handle all forms of India insurance.
Indian Insurance: Sector Reform
The formation of the Malhotra Committee in 1993 initiated reforms in the Indian insurance sector. The aim of the Malhotra Committee was to assess the functionality of the Indian insurance sector. This committee was also in charge of recommending the future path of insurance in India.
The Malhotra Committee attempted to improve various aspects of the insurance sector, making them more appropriate and effective for the Indian market.
The recommendations of the committee put stress on offering operational autonomy to the insurance service providers and also suggested forming an independent regulatory body.
The Insurance Regulatory and Development Authority Act of 1999 brought about several crucial policy changes in the insurance sector of India. It led to the formation of the Insurance Regulatory and Development Authority (IRDA) in 2000.
The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to initiate different policy measures to help sustain growth in the Indian insurance sector.
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. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad. Detailed information on IRDA is available at their web-sitewww.irdaindia.org
Protection of the interest of policy holders:
IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps:
• IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and non-life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim.
• The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims.
• It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public.
Growth Of Indian Life Insurance Sector
The life insurance sector of India has added up to 4.1% of the GDP in 2009, a considerable growth was recorded since the time the sector was opened for the private companies. The contribution in FDI by the life insurance segment was recorded at US $ 1.3 billion, even though the government is likely to increase the FDI cap limit from 26% to 49%, a bill of which is pending at the Rajya Sabha.
The year 2009-10 also saw private sector insurance company, Aviva Life Insurance establishing nine unit-linked plans, in line with the recent IRDA guidelines featuring enhanced and higher internal rate of return (IRRs).
As per the data provided by the IRDA, the businesses of the life insurance companies had a growth of 22% at US$ 12 billion in April-November 2009-10, in comparison to the US$ 9.8 billion during the same period last year. Such a huge sale of single premium policies led the industry to record a raise of 53.25% in November 2009 alone.
With the registration of IndiaFirst Life Insurance Company Limited, a joint stake life insurance company encouraged by Bank of Baroda and Andhra Bank of India and Legal & General Middle East Limited, UK, the total number of of life insurers registration with the Insurance Regulatory Development Authority (IRDA) has increased to 23.
According to industry body, Life Insurance Council, The life insurance industry had earlier been anticipated to grow by 15% in the year 2009 - 10 and surpass the US$ 54.1 billion mark in total premium income by March-end. This growth in premium income includes new business as well as renewals, driven by increasing awareness on the value of getting insured.
The US$ 41-billion Indian insurance industry made a grand return with better performances in the April-November 2009 period. Life insurance in India recorded the first year premium (inclusive of Single Premium) segment accounting to US$ 24 billion.
FDI Policy in Indian Life Insurance Industry
The FDI limit in the insurance sector has been capped at 26% for the foreign marketeers but the government is thinking to increase it to 49% and a bill of this offer is pending at the Rajya Sabha. The LIC is still the major company in the life insurance sector but with such an emergence of the private companies, providing a range of moneymaking policies and investment chances for people from all walks of life the situation is fast changing. The Unit Linked Investment Plans (ULIP) offering life cover as well as scope for savings and investment deserves extra acknowledgement in this issue. Furthermore, with minimum lock-in period of three years such plans are subjected to avoid miss usage of important tax benefits.