The document discusses foreign direct investment (FDI) in India's insurance sector. It provides background on the history and development of insurance in India. Key points:
- Currently, FDI in insurance is capped at 26% but the government proposes raising this to 49% to increase capital in the growing private insurance sector.
- Since opening to private companies in 2000, the insurance sector has seen significant growth, though public sector companies still dominate.
- Private life insurers have increased their market share over time through innovative products, but public insurer LIC still has the largest share at around 65%.
- Raising the FDI limit is expected to further boost capital availability and competition in insurance, supporting the
For full text artical go to: http://www.educorporatebridge.com/insurance/insurance-sector-in-india/Insurance sector in India is considered as a huge market due to its momentous untapped potential. This sector is said to improve the standard of living of the people in an economy as it leads to risk free lives, promotes entrepreneurship, mobilizes savings and leads to protection of trade and industry which contributes in human progress.
The document outlines the history and development of the insurance industry in India, including the establishment of early life insurance companies in the 1800s, key acts passed in the 1900s and 2000s, and the formation of LIC. It discusses the types of insurance as life (protection of family finances) and general (policies not covering life, such as motor vehicle, fire, property, and health). Current growth rates of the life and general insurance markets are provided, as well as the public and private sector market shares. The expected future size and growth of the untapped Indian insurance market is also mentioned.
“A STUDY OF THE IMPACT OF LIBERALIZATION ON THE INDIAN LIFE INSURANCE INDUSTRY”Somnath Pagar
This study tries to give an overview of the impacts of liberalization and deregulation processes in Indian life insurance industry.And also takes into account the efficiency improvement in the life insurance industry in the wake of deregulation. To sum up, following research questions are answered in the research study.
1) What is the present scenario of the industry? How different it is from the pre liberalization scenario?
2) The competition in the sector is expected to increase. So what is the present state and nature of competition? What changes have taken place in the market structure of life insurance industry?
3) Whether firms are efficient or not? Whether or not the efficiency and of the insurance market is improving after liberalization?
4) How did liberalization contributed in product innovation and customer service benchmark in life insurance industry?
5) What are the implications of liberalization on spread and coverage of social security measures?
*******
This document provides an overview of the Indian insurance sector, including its history, current state, position globally, and future prospects. It discusses key milestones such as the nationalization of insurance in India in 1956 and 1999. Currently, India's insurance penetration and density is lower than other countries, but the sector is growing rapidly due to reforms, deregulation, and the entry of private players. While the industry faces issues like lack of agent quality, trends such as the expanding rural market and health insurance provide opportunities for future growth. Strengthening regulations and using technology are some suggestions to further develop the insurance sector in India.
The document discusses the history and development of the insurance sector in India. It notes that insurance was initially nationalized and state-owned companies dominated the market. Liberalization in the 1990s allowed private companies to enter the sector. Now there are many private life, health, and general insurance companies operating alongside state-owned insurers, increasing competition and improving customer choice, services and products. However, some risks remain, such as companies prioritizing profits over customers.
This document discusses the impact of the global financial crisis on the Indian insurance industry. It provides background on the history and development of insurance in India. It then describes the current state of the Indian insurance market, which includes both public and private sector players. Finally, it discusses the global financial crisis that began in 2007-2008 and its effects on financial institutions worldwide. In 3 sentences:
The document provides context on the history and development of the Indian insurance industry. It then outlines the present scenario of the industry, which includes both public and private players competing in the large and growing Indian market. Finally, it introduces the global financial crisis that began in 2007 and may have impacted the Indian insurance sector.
The document discusses the Insurance Regulatory and Development Authority of India (IRDAI), which regulates and develops the insurance industry in India. It was established in 1999 by an act of Parliament. IRDAI operates from its headquarters in Hyderabad, Telangana. It oversees 24 life insurance companies and 28 general insurance companies in India. IRDAI's goals include protecting policyholders, promoting fair practices in the insurance industry, and ensuring its orderly growth to benefit the Indian economy.
Penetration Of Life Insurance and General Insurance In IndiaSudipta Das
The document summarizes the evolution of the life insurance and general insurance industries in India. It discusses how the industries were previously dominated by state-owned entities but have since opened up to private and foreign competition following deregulation in the late 1990s and early 2000s. This has led to rapid growth in the industries, with the market share of private insurers increasing each year. The document also examines trends in various insurance sub-sectors like health and motor insurance, and discusses some of the opportunities and challenges for further developing the insurance industry in India.
The insurance industry in India has grown rapidly in recent years. Life insurance premiums grew at a CAGR of 20.1% from 2003-2012, while non-life premiums increased at 18%. Private sector participation also increased substantially over this period. Key growth areas for the insurance industry include health, motor, and crop insurance. The government has introduced several policies to support the development of the insurance industry in India.
A study on the growth of indian insurance sectoriaemedu
The document summarizes the growth and development of the Indian insurance sector. It discusses key milestones like the nationalization of life insurance in 1956 and general insurance in 1972. It then covers the liberalization period starting in 1999 with the establishment of IRDA, which allowed private players to enter the market. Today there are 29 insurance companies with private players controlling around 26% of life and non-life markets. While competition has increased, the four public sector insurers still dominate with over 70% combined market share. The document also provides tables outlining the major players in life and general insurance.
The Case for Increasing FDI Caps in Insurance
The history of India’s political economy is replete with missed opportunities. The approach to growth and investment has been often stranded in the many romantic notions of selfreliance and what constitutes national interest. In every
decade since Independence, the approach to foreign direct investment has been influenced by a mistrust triggered by a colonial hangover. Every time India has opened its doors – or windows if you please – to foreign investment, it has been characterised by gradualism in the wake of much opposition. The debates around opening or expanding FDI are similar – as it was when telecom or banking opened up for foreign investment. What is important to recognise is that every such initiative has been beneficial, delivering greater common good.
Higher economic growth is driven by competition and consumer choice. Competition drives efficiency and efficiency drives growth. This is true of every country that has done well economically. It is also true of India since 1991, in segments where competition has been introduced. Any attempt to artificially introduce protection always has costs. Inefficient producers are protected, but at the expense of consumers. Consumers suffer from higher prices,bad service and limited choice. This is straightforward under-graduate economic theory. The gains to inefficient producers are more than neutralized by losses to consumers, leading to an overall deadweight welfare loss to the country.
In this argument, the colour of the competition, whether it is domestic or foreign, does not matter. In addition, there is the macroeconomic argument about a current account deficit having to be met through capital account inflows and non-debt-creating FDI inflows are preferable to debt-creating capital inflows. While these broad arguments about competition and FDI are accepted, the question to ask is, why should the insurance sector not be subject to these compelling arguments? Is there anything special about insurance that rational arguments should not be applied to
this sector? In every sector where India has opened up to FDI, be it manufacturing or be it services, two propositions are empirically evident. First, liberalization helps consumers. Second, fears about inefficient producers being eliminated are also vastly exaggerated.
Instead, producers of goods and services adapt and survive, based on access to capital, technology, knowhow, improved management practices and customer orientation. Therefore, protection not only harms the cause of consumers, it also harms the cause of producers. There is no reason why insurance should be treated differently. And economic logic and rationale should not be conditional on whether one is within the government or is in opposition.
This document presents information about the insurance sector in India. It discusses the privatization of insurance, the growth of major private players in the sector, and the key driving factors such as rising incomes and demand from semi-urban populations. It also outlines some of the challenges and opportunities in the Indian insurance market since privatization, such as the need for effective mass marketing strategies and leveraging new technologies. Overall, the privatization of insurance has led to increased competition, new products, and higher salaries compared to when it was previously dominated by state-owned providers.
Globalisation, liberalisation and privatisation of insuranceHabib Zafar
Globalisation, liberalisation, and privatisation have transformed the insurance industry in India. The Insurance Regulatory and Development Authority Act of 1999 ended state-owned insurers' monopoly and allowed private companies to enter the market. Many private insurers have global insurance companies as partners, bringing foreign investment. While this increased competition benefits consumers, it has also led to consolidation in the industry through mergers and acquisitions. The globalization of insurance continues to impact regulations and the competitive landscape in India.
This document provides an overview of the insurance sector in India, including its history, current state, and prospects. It discusses key milestones in the development of life and general insurance in India. It outlines the current regulatory framework and major players. It also places the Indian insurance sector in a global context, noting opportunities for growth. While penetration and density are still low compared to other countries, factors like deregulation, technology, and a large population provide potential for expansion. Issues around product diversification and quality of agents need addressing. The sector is poised for continued growth if it offers innovative products tailored to customer needs.
The Role of FDI in the Indian Insurance IndustrySaurabh Kumar
Foreign direct investment (FDI) plays an important role in India's insurance industry. While India was previously closed to foreign investment in insurance, it has increasingly opened up to FDI over the past few decades. Raising the FDI cap to 49% provides benefits like increased insurance penetration, capital inflows, and job creation. However, some drawbacks are that domestic insurance companies may lose business and have less control over foreign insurers. The document discusses the history and evolution of insurance in India, current status and opportunities in the sector, as well as the benefits and challenges of increased FDI limits.
The document discusses the present state and prospects of the Indian insurance sector in a global context. It provides a brief history of insurance in India and outlines key milestones. It also discusses the current scenario in India, comparing factors like insurance penetration and density to other countries. The major driving forces for the industry are identified as globalization, deregulation, and the growing market opportunities in India. Issues facing the sector include a need for diversification and improving agent quality. The document concludes by emphasizing the importance of a well-regulated insurance industry for future economic progress in India.
Insurance is a form of risk management where one party agrees to pay an agreed amount of money to another party in the event of a loss or damage. The key aspects of insurance include risk transfer through premium payments, hedging against contingent losses, and regulatory requirements to protect policyholders. Reforms since the 1990s have opened India's insurance sector to private companies and increased competition, leading to greater access and customer choice. Further reforms aim to strengthen regulation and increase insurance coverage, especially for health, life and small businesses. A developed insurance sector supports the economy through risk protection, long-term funding, and financial stability.
The document provides an overview of the Indian insurance industry. Some key points:
- The overall insurance industry in India is expected to reach $280 billion by 2020, with life and non-life insurance growing rapidly.
- Private sector players have increased their market share in both life and non-life insurance segments over the past decade.
- Growth is expected to be driven by segments like crop, health and motor insurance. Enrolment in government schemes is also increasing insurance penetration.
- Total life insurance premiums reached $64.8 billion in FY17, while non-life premiums were $23.38 billion in FY18. Both segments have seen strong growth over the past years
The insurance sector in India is governed by various acts and regulations. It has grown significantly in recent decades but penetration remains low, with over 80% of the population lacking life or health insurance. Reforms including allowing private companies and 26% foreign ownership have increased competition and improved products. The regulatory framework continues developing to promote growth while protecting policyholders.
The document provides an overview of trends in the Indian insurance sector. It discusses the history and development of insurance in India, including the nationalization of life insurance in 1956 and general insurance in 1972. It then summarizes recent trends like the introduction of unit-linked insurance policies and increasing online sales. The objectives of liberalization policies in 1991 that opened the sector to private companies are outlined. Finally, measures taken by regulators to develop the insurance market and protect policyholders are summarized.
This document provides an overview of the Indian insurance industry in an international context. It finds that:
1) The Indian insurance market is the 19th largest globally and 5th largest in Asia, with total premiums of $17.3 billion in 2003, representing 0.6% of the world market.
2) Insurance penetration in India, at 2.88% of GDP in 2003, is relatively low internationally but commensurate with India's income level.
3) Insurance density in India, at $227 per capita in 2003, is lower than most major Asian markets, indicating significant potential for future growth.
This document discusses the recruitment of advisors and sales of financial products through advisors in the life insurance industry in India. It provides background on the history and development of the life insurance sector in India. It describes how advisors, also known as agents, are critical to the distribution and sales process, as they are the primary channel through which insurance companies can explain policies and benefits to customers. The success of insurance companies depends on having an adequate network of agents to capture market share.
The document provides an overview of the insurance industry in India. It discusses the history and development of the insurance sector in India, including the establishment of regulatory bodies like the Insurance Regulatory and Development Authority (IRDA). It also outlines the major types of insurance available in India, key players in the life and non-life insurance sectors, as well as growth factors and challenges facing the industry. The insurance sector is poised for further growth given India's large population and increasing incomes.
This document provides an overview of the history and growth of the Indian insurance sector. It discusses how the sector was initially nationalized but has since opened to private players. Some key points:
- Insurance began in India in the 1800s but was nationalized in 1956 for life insurance and 1973 for general insurance. Reforms began in 1999 allowing private firms.
- Today there are 29 insurance firms - 14 private life insurers, 9 private non-life insurers, and 6 public sector firms.
- While private firms now make up over 26% of the markets, public sector firms still dominate with LIC having over 74% market share in life insurance as of 2005.
- Future growth areas include
The document provides an overview of the history and development of the insurance industry in India. It discusses how insurance has ancient roots in India but modern insurance developed under British occupation in the 18th-19th centuries. The life insurance and general insurance sectors developed separately, with the life insurance sector nationalized in 1956 and general insurance in 1972. Reforms in the late 20th century opened the sectors to private companies. Today there are many public and private insurance companies operating in India and insurance contributes significantly to India's GDP.
The document provides an overview of the insurance sector in India. It discusses the origin and history of insurance in India, from the establishment of the first insurance companies in the 1800s to the nationalization of the industry and its recent liberalization. It also defines the concept of insurance, classifies the different types of insurance, and outlines some of the major players and trends in the Indian insurance market.
The document provides an overview of the general insurance industry in India. It discusses how general insurance started in India in the 19th century under British companies and was later nationalized. It was reopened to private companies in 1999. The summary discusses the key points of the industry's history, current state with low penetration compared to other countries, and future growth potential as regulations open the industry to more private and foreign players.
Emerging dimensions of insurance sector and analyticsPrashant Mehta
Insurance in India has a long history dating back to 1818 and has undergone significant changes over the years, with major milestones including the nationalization of life and general insurance.
The insurance sector was opened up to private companies in 1999 with the passing of the IRDA Act, and has since seen considerable growth and investment from foreign players.
Today the insurance industry is one of the largest sectors in India and is well-regulated by the Insurance Regulatory and Development Authority. It comprises both government and private life and general insurers.
The Imperative of Insurance Companies and the Industry’s Development in Nigeriaijtsrd
The purpose of this study was to investigate the Imperative of Insurance Companies and the Industries Development in Nigerian. To carry out the study effectively, we studied ten Insurance Companies in Nigeria, their trends in the structure of insurance companies, the structure and growth in the companies, type of Ownership and the paid up capital of the insurance Industry, Premium Income and the number of Insurance Companies, Assets of the Insurance Company and the type of Business undertaken, and the investment patterns of the Insurance companies, which serve as the measures of variables in the study. Questionnaires were designed to obtain the primary data for the study. The Analysis of Variance ANOVA , Statistical Techniques were used to analyse and test the significance of data collected. The results of the analysis revealed that there is a positive difference between type of ownership and paid up capital of the Insurance Companies that a significant difference exists between the Premium Income and the number of Insurance Companies in Nigeria that the assets of the Insurance Companies and the type of business undertaken by them have no significant differences and finally, there is also a significant difference in the Investment patterns and the type of business undertaken by the Insurance Industry. The implication of the study led to the recommendation that the Government and society should design policies and programmes that could stem the evil practices prevalent in the Insurance Companies as it does have a favourable impact on the Industry’s development in Nigeria. Dr. Odogu Laime Isaac | Disu Babatunde Sulaiman "The Imperative of Insurance Companies and the Industry’s Development in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-7 | Issue-3 , June 2023, URL: https://www.ijtsrd.com.com/papers/ijtsrd58571.pdf Paper URL: https://www.ijtsrd.com.com/management/accounting-and-finance/58571/the-imperative-of-insurance-companies-and-the-industry’s-development-in-nigeria/dr-odogu-laime-isaac
This document provides an overview of the insurance industry in India and IDBI Federal Life Insurance. It discusses the history of insurance in India dating back to ancient texts. Key developments include private players entering the market in 2000 which has led to growth. The future of the industry is promising with projections of the market reaching $63 billion by 2014 and insurance penetration increasing to 5-6% over the next 5 years. IDBI Federal Life Insurance aims to increase its brand awareness and market share through new products and improved services.
This document provides an overview of the life insurance industry in India. It discusses how the industry has grown significantly over the years and now represents a major economic sector. While insurance penetration is still low compared to other countries, there is huge growth potential as nearly 80% of the population lacks adequate life or health insurance. The regulatory framework for insurance is outlined, including the key acts governing the industry and the role of the Insurance Regulatory and Development Authority. Segment-wise splits of new business premiums collected in 2010 and 2011 are also presented in charts.
Dynamics of-agency-recruitment-insurnace-sector1Nagpur home
The document is an industrial training project report submitted by a student for their MBA program. It provides an overview of the insurance sector in India, including a brief history highlighting key milestones such as the nationalization of insurance companies in 1956 and their privatization in 1999-2000. It discusses the underdeveloped state of the insurance market in India prior to privatization and the reasons for private insurance companies entering the Indian market, such as low penetration rates and the inability of LIC to cover more than 10-15% of the population.
Micro insurance in Indian perspective (By Ashish Sartape)Ashish Sartape
- 90% of Indians lack insurance coverage, highlighting the importance of microinsurance.
- Microinsurance began in India in the 19th century and was nationalized in 1956 before being liberalized in the 1990s.
- Microinsurance is defined as low-cost insurance for low-income individuals and covers products like health, life, crops and livestock.
- Major providers of microinsurance in India include LIC, ICICI Prudential and HDFC Standard.
This document provides a project report on the sales process of life insurance. It includes an acknowledgement, declaration, table of contents, and introduction discussing the history and major players of the Indian life insurance industry. The report was submitted by a group of students from the Indian Institute of Planning and Management in Hyderabad, India under the guidance of an instructor from Metlife India Insurance.
Ulip as an investment avenue mba final year project 126195944 (1)PrataykshaSingh
The insurance industry in India started in the 19th century under British rule without regulation. After independence, the life insurance industry was nationalized in 1956 and general insurance was nationalized in 1972. Private insurance companies were allowed to enter in 1999 with a maximum 26% foreign holding. The opening up of the insurance sector has led to higher savings, expansion of capital markets, and increased foreign investment and employment. The size of the Indian insurance market is growing at 10% annually and has the potential to sustain over 100 insurers. Recent regulations established the Insurance Regulatory Development Authority to regulate the sector as it opens to more private and foreign players.
A Study of DSA Network Expansion and Product Promotion Strategy of General...Anish Singh
A summer project of the insurance sector. that you rarely found.
In this project, u will get promotion strategy, how u sell the insurance and their ways. how to pitch agents and made for your company. thank you
Claims management is a complex but important process for insurance companies. It involves assessing claims, investigating losses, negotiating payouts, and settling claims according to policy terms, while aiming to reduce expenses and resolve claims efficiently. Effective claims management requires eliminating manual processes, leveraging claims data, and having rules and procedures to guide assessments and payments. It aims to balance customer service with keeping costs low.
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online.
The document provides an overview of the insurance sector in India. It discusses the history and evolution of insurance in India including the establishment of key insurance companies. It describes the different types of insurance such as life insurance (term plans, endowment plans, etc.) and general insurance (health, fire, marine, motor, etc.). It also discusses the major players in the life and general insurance sectors in India as well as the role of the Insurance Regulatory and Development Authority (IRDA).
Neither of excess is good for the society, it has to be balanced to achieve maximum social benefit. Dalton called this principle as "Maximum Social Advantage" and Pigou termed it as "Maximum Aggregate Welfare". It was introduced by Swedish Economist "Erik Lindahl in 1919". See my ppt for additional details.
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Purchasing a home is a significant milestone, but the financial commitment can be daunting. Thankfully, various government subsidies and schemes can ease the burden. In this blog post, we'll delve into the intricacies of the government subsidy for house, the benefits of a government subsidy on home loan, and the attractive housing loan interest subsidy offered by Kathiriya Subsidy House. Understanding these can help you make informed decisions and potentially save a substantial amount of money on your home purchase.
An effective organisational framework can also play a key role in deterring and detecting fraud, and by providing a clear structure, hierarchy, and culture of accountability, an effective organisational framework can make it more difficult for fraud to occur. Analytical techniques are a valuable tool for detecting and investigating corporate fraud and by using analytical techniques effectively, auditors can help protect companies from fraud and financial losses. Corporate fraud is a serious problem that can have devastating consequences for businesses of all sizes, and there are several things that businesses can do to deter and detect fraud, including creating a culture of ethics and transparency, having strong internal controls in place, and implementing fraud prevention technologies. Deterring and detecting fraud is an effective organisational framework that can also support effective functioning by providing a clear roadmap for how the business should operate, promoting communication and collaboration between employees, and providing employees with the resources and support they need to do their jobs effectively
The JD Euroway and Fritzgerald Zephir (Fritz) Financial Debacle.pptxsonalisaini008
In an astonishing series of events, Finance JD Euroway Inc. and its CEO Fritzgerald Zephir (Fritz) find themselves embroiled in a high-stakes legal battle, accused of orchestrating a fraudulent investment scheme.
The JD Euroway and Fritzgerald Zephir (Fritz) Financial Debacle.pptx
insurance details
1. IJRESS
Volume 3, Issue 3 (April 2013)
ISSN: 2249-7382
ANALYSIS OF FDI IN INSURANCE SECTOR IN INDIA
Yogita Sharma*
ABSTRACT
There is hardly a facet of the Indian psyche that the concept of ‘foreign’ has not permeated.
This term, connoting modernization, international brands and acquisitions by MNCs in
popular imagination, has acquired renewed significance after the reforms initiated by the
Indian Government in 1991. Generally speaking FDI refers to capital inflows from abroad
that invest in the production capacity of the economy and are “usually preferred over other
forms of external finance because they are non-debt creating, non-volatile and their returns
depend on the performance of the projects financed by the investors. FDI also facilitates
international trade and transfer of knowledge, skills and technology. “Foreign direct
investment is of growing importance to global economic growth. This Paper mainly focus on
the Foreign Direct Investment in the Insurance sector and its significance in insurance
sector in India . The Insurance sector in India has a great potential even during the
downtrend and FDI flow is expected to rise in the mere future. This paper attempt to current
status of fdi in insurance sector in India. Currently, only 26% of FDIs is permitted in
insurance sector. The total insurance business would touch US$ 60 billion size. If insurance
sector is opened up to an extent of 49% for FDIs, it is expected that FDI’s contribution to
insurance business would touch nearly US$ 2 billion.
*Lecturer in Commerce, GNG College, Yamuna Nagar
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2. IJRESS
Volume 3, Issue 3 (April 2013)
ISSN: 2249-7382
INTRODUCTION
There is hardly a facet of the Indian psyche that the concept of ‘foreign’ has not permeated.
This term, connoting modernization, international brands and acquisitions by MNCs in
popular imagination, has acquired renewed significance after the reforms initiated by the
Indian Government in 1991. Generally speaking FDI refers to capital inflows from abroad
that invest in the production capacity of the economy and are “usually preferred over other
forms of external finance because they are non-debt creating, non-volatile and their returns
depend on the performance of the projects financed by the investors. FDI inflow helps the
developing countries to develop a transparent, broad, and effective policy environment for
investment issues as well as, builds human and institutional capacities to execute the same.
The insurance sector is of considerable importance to every developing economy; it
inculcates the savings habit, which in turn generates long-term investible funds for
infrastructure building. The nature of insurance business ensures constant inflow of funds the payout is staggered and contingency related - thereby making it readily available for
investment on infrastructure building. Its contribution to GDP is quite significant. The Union
government had opened up the insurance sector for private participation in 1999, also
allowing the private companies to have foreign equity up to 26 per cent. Following the
opening up of the insurance sector, many private sector companies have entered the insurance
business. The insurance sector has been a fast developing sector with substantial revenue
growth in the non-life insurance market, but in spite of its huge population.
International Journal of Research in Economics & Social Sciences
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3. IJRESS
Volume 3, Issue 3 (April 2013)
ISSN: 2249-7382
HISTORY OF INSURANCE
A contract of insurance may be defined as a contract whereby, one person, called the
‘insurer’, undertakes, in return for the agreed consideration, called the ‘premium’ to pay to
another person, called ‘assured’, a sum of money or its equivalent on the happening of a
specified event.The aim of all insurance is to make provisions against dangers which beset
human life and dealings. Those who seek it endeavor to avert disasters from themselves by
shifting possible losses on the shoulders of others who are willing for pecuniary
consideration, to take risk thereof, and in the case of life assurance, they endeavor to assure to
those dependent on them a certain provision in case of their death, or to provide a fund out of
which their creditors can be satisfied. In India, insurance has a deep-rooted history. It finds
mention in the writings of Manu (Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya
( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed
in times of calamities such as fire, floods, epidemics and famine. This was probably a precursor to modern day insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has
evolved over time heavily drawing from other countries, England in particular.
THE BRITISH PERIOD
1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. 1870 saw the
enactment of the British Insurance Act. This era, however, was dominated by foreign
insurance offices which did good business in India. The Indian Life Assurance Companies
Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian
Insurance Companies Act was enacted to enable the Government to collect statistical
information about both life and non-life business transacted in India by Indian and foreign
insurers including provident insurance societies. In 1938, with a view to protecting the
interest of the Insurance public, the earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for effective control over the activities
of insurers.
OBJECTIVES OF STUDY:
•
Toknow what are the strength/opportunity and weakness and threats.
•
To know the significance of Foreign Direct Investment for Indian Insurance Industry.
•
To know what are the problems faced by in insurance sector in India.
•
To know why opposite parties against raising fdi in insurance sector.
International Journal of Research in Economics & Social Sciences
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4. IJRESS
•
Volume 3, Issue 3 (April 2013)
ISSN: 2249-7382
To knowwhat areissues regardingfdi in insurance sector in India.
SWOT ANALYSIS
STRENGHTS/OPPORTUNITY
•
A range of new products had been launched to cater to different segments of the
market, while traditional agents were supplemented by other channels including the
Internet and bank branches.
•
These developments were instrumental in propelling business growth, in real terms, of
19% in life premiums and 11.1% in non-life premiums between 1999 and 2003.
•
India has a large population with an increase in its per capita income.
•
India’s middle income is rapidly increasing emerging as a profitable market.
•
India’s improving economic fundamentals will support faster growth in per capita
income in the coming years, which will translate into stronger demand for insurance
products.
•
Strong growth can be sustained for 30–40 years before the market reaches saturation.
•
There is plenty of room for growth in personal accident, health and other liability
classes.
•
Rising household income and risk awareness will be the key catalysts to spurring
more demand for these lines of business in the future.
•
Health insurance could potentially have an important role in driving insurance market
development forward.
WEAKNESS/THREATS
•
India is among the lowest-spending nations in Asia in respect of purchasing insurance
(China, which spent USD 36.3 per capita on insurance products & Indian spent USD
16.4) .
•
Even after the liberalization of the insurance sector, the public sector Insurance
companies have continued to dominate the insurance market.
•
In the long run, other forms of non-price competition like aggressive advertisement
wars are likely to lead to increasing costs, eventually harming the interests of the
consumers.
•
A key challenge for India’s non-life insurance sector will be to reform the existing
tariff structure. From a pricing perspective, the Indian non-life segment is still heavily
regulated
•
Reinsurance is only provided by GIC .
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5. IJRESS
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Volume 3, Issue 3 (April 2013)
ISSN: 2249-7382
While the insurance business is highly concentrated in India, the share of foreign
companies is low.
•
Strong growth prospects pose pressure on the industry, and the economy at large, to
better manage the exposure to natural perils.
•
Questionable Reputation of the Foreign Partners.
THE NATIONALIZED ERA
The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also
allegations of unfair trade practices. The Government of India, therefore, decided to
nationalize insurance business.
An Ordinance was issued on 19th January, 1956
nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in
the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident
societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s
when the Insurance sector was reopened to the private sector.This millennium has seen
insurance come a full circle in a journey extending to nearly 200 years. The process of reopening of the sector had begun in the early 1990s and the last decade and more has seen it
been opened up substantially. In 1993, the Government set up a committee under the
chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for
reforms in the insurance sector. The committee submitted its report in 1994 wherein, among
other things, it recommended that the private sector be permitted to enter the insurance
industry. They stated that foreign companies be allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.Following the recommendations of
the MalhotraCommittee report, in 1999, the Insurance Regulatory and Development
Authority was constituted as an autonomous body to regulate and develop the insurance
industry. The IRDA opened up the market in August 2000 with the invitation for application
for registrations. Foreign companies were allowed ownership of up to 26%. In December,
2000, the subsidiaries of the General Insurance Corporation of India were restructured as
independent companies and at the same time GIC was converted into a national reinsurer.
Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there
are a number of private sector insurance companies. The table below shows the breakup of
insurance companies:-
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Type of Business
No of Public Sector
No of Private Sector Total Companies
Companies
Companies
Life Insurance
01
20
21
General Insurance
06
14
20
Re insurance
01
0
1
Total
08
34
42
Source: Insurance Regulatory & Development Authority Official Website www.irda.org
The insurance sector in India used to be dominated by the state-owned Life Insurance
Corporation and the General Insurance Corporation and its four subsidiaries. But in 1999, the
Insurance Regulatory and Development Authority (IRDA) Bill opened it up to private and
foreign players, whose share in the insurance market has been rising.As a part of overall
financial sector reforms, the Government set up the Committee for Reforms in the Insurance
Sector in 1992. In its report released in early 1994, it recommended the opening up of the
sector to private sector participation.
CURRENT STATUS OF FDI IN INSURANCE SECTOR
Since end of 2000, While Life insurance has been privatized. Indian Government have
opened the entry door for foreign players and private companies in Life insurance sector. In
the present scenario has revealed 22 Private Life Insurance Companies working in Indian
markets, Private life insurance companies have been keeping behind Indian largest public
company’s (LIC) in an innovative products, smart marketing, and aggressive distribution
attracts customer toward the private life insurance companies, sign up Indian customers faster
than anyone expected. Indian, who had always seen life insurance as atax saving device, are
now suddenly turning tothe private sector and snapping up the newinnovative products offer
to customers and investmentplans. The Life Insurance companiesin India have grew by an
impressive 36% withpremium income in the year 2003-2004 Rs 24.29billion from new
business Rs253.43 billion during the fiscal year 2004-2005 in this duration havebeen braving
stiff completion from Private Life Insurance Companies. In which LIC has clocked21.87%
growth in business at Rs 197.86 billion by selling 2.4 billion in new polices in the year 20042005, but this was still enough the fall. Its market share as Private Player grew 129% Rs
55.57 billion in the year 2004-2005 with annual growth rate 15-20 %, the largest number of
Life Insurance Polices in force, the potential of the Indian Insurance industry is huge.The
total value of insurance market estimated Rs 450 billion in 2004-2005.Theinsurance business
grow in India 17% in Fiscal year 2008-2009 $ 30 billion. The country economy clocks GDP
7.6%. In Fiscal year 2007-2008 Life Insurance has been grown up their business 23.3%Rs
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930 billion, The Private Life Insurance Companies have made a record first quarter year in
2009,has recorded 13.22% growth in first year premium and 20.36% number of polices
increase after the considering to extend the limit of FDI in insurance industry. In the year
2002-03 public company’s (LIC) was collected 546228.49 cr. in the comparison with five
selected private sector companies their were total collection 733.52 cr. we can discus in the
year 2004-05 while total significant collection of public company was 75127.29 and in a
comparatives withselected private companies their were total collection of premium around
4402.29 cr. In the year 2007-08 while total collection of public company’s was 149789.99 cr.
and selected private companies their were total collection of premium 27979.99 cr. In during
the last session 2009-10 public company has been collected total premium around 1, 85,985,
its comparison of selected private companies, their were total collection of premium
16,495.86 cr. The huge premium collection have increased every financial year that was
gearing insurance business in India on fast pace.Presents the resultant figure of the insurance
companies and its market share that indicate the penetration of life insurance companies in
Indian markets, such penetration indicate the fruitful growth and its positive result of
utilization foreign investment in life insurance sector. The new players have improved the
service quality of the life insurance. As a result haveseen LIC continuing declining in its
career from theyear 2000 onward, market share have been distributing among the private
players. In the financial year 2009-10, LIC still hold 65% market share among doing business
of life insurance companies in India, for upcomingnature of these private players are gaining
strength togive more competition to LIC in earlier future. Marketshare of LIC has decreased
from 95 %( 2002-03) to 81%(2004-05), in the financial year 2007-08 still hold 74.39%and
following private players hold the rest of themarket share.The central government has
proposed to enhance foreign direct investment (FDI) in insurance to 49% in its second wave
of reforms announced recently. At present foreign investment in private insurance companies
is restricted to 26% of their capital, which is now proposed to be increased to 49% by passing
an amendment to the Insurance Act in the ensuing session of Parliament. Announcing this
decision, finance minister P Chidambaram said “the benefits of this amendment to the
insurance act will go to the private sector insurance companies, which require huge amounts
of capital and that capital will be facilitated with the increase in foreign investment to 49%.”
He also clarified that this will not apply to public sector insurers like Life Insurance
Corporation of India (LIC) and the five general insurancecompanies. At present there are 44
private insurance companies authorized by the Insurance Regulatory and Development
Authority (IRDA) operating in the country. These comprise of 23 life insurance, 17 general
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insurance and four health insurance companies, since the insurance sector was opened for
private sector in the year 2000. These are all joint ventures between the Indian promoters who
hold up to 76% and foreign insurance companies who hold up to 26% as mandated by the
law.The insurance business requires additional capital as it grows and this has to come from
the promoters. If the Indian promoters are unable to contribute their share of the capital, they
will not be able to grow. Foreign companies with deep pockets will be able to fill this gap, if
they are allowed to invest up to 49% of the capital. It is estimated that the private insurers
need about Rs60,000crore of additional capital during the next five years. Therefore, the
raising of FDI cap to 49% will come handy for the foreign partner to increase their stake in
the company, without the local partner having to put matching capital in to the company. The
foreign partner will bemore than happy to increase its stake, as it will help it get a bigger
share of the pie, and will also give it a larger role in running the company according to its
ways, by virtue of a higher shareholding in the company. This will, therefore, be a boon to
the foreign insurers to come to India in a big way.
PROBLEMS FACING THE INDIAN INSURANCE SECTOR:
The government’s intention was to create a monopoly and protect it from foreign and private
competition. So, what were the implications of such a conservative approach? Insurance
sector faced problems such as capital scarcity, poor product quality and technological
obsolescence. In the year 2000, life insurance penetration in india stood at an abysmal 2.4%.
There is a huge lack of proper awareness regarding the need of insurance.
Insurance premiums are looked at as a means of tax evasion and savings. The true
importance of insurance often gets overlooked. In addition to this, india is a country with a
huge lower middle class section.In their daily struggle to try and get both the ends meet,
insurance premiums come as a luxury.
The inflexible and expensive plans offered in the market make it more difficult for the
common people to invest.
The situation in rural india is even worse. A small fraction of the people have bank
accounts, and the concept of insurance is very much alien. People have little disposable
income, and the only form of life insurance is joint family
MYTHS ABOUT HIKE IN FDI IN INSURANCE FROM 26% TO 49%
MYTH
1:
FDI
CAP
HIKE
NECESSARY
TO
IMPROVE
INSURANCE
PENETRATION
NO! DOMESTIC CAPITAL MARKETS ARE ENOUGH.
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UPA claims that to improve insurance penetration in country additional capital of
Rs.60,000crores required over 2010-2015 based on IRDA projections. Since constraints of
Indian partners to currently contribute 74% of capital are a hurdle, foreign partners will
contribute if cap relaxed. BUT IRDA Chairman’s deposition to Parliamentary Standing
Committee itself states these projections are “not very accurate” and “just an arithmetic”.
Public Sector insurance companies are confident of being able to raise money from domestic
capital markets as and when required. No need for hiking cap.
MYTH 2: FDI CAP HIKE NECESSARY TO INCREASE INFRA INVESTMENTS
NO! LIC & PUBLIC SECTOR NON-LIFE COMPANIES CONTRIBUTE OVER 70%
OF INFRASTRUCTURE INVESTMENTS
UPA claims investments are required in crucial infrastructure sector and increasing FDI will
enable private insurers to hike spend on infra – BUT LIC’s share of investment in infra was
70% and that of public sector general insurers’ was 71% compared to the private sector
during 2009-10 so it is obvious that private insurers with foreign partners are more interested
in profits than in investing in buildingIndia! Presence of foreign equity does NOT increase
infra investments.
MYTH 3: FDI CAP HIKE NEEDED TO IMPROVE PRODUCT OFFERING
NO! CURRENT 26% LIMIT ENOUGH TO BRING IN NEW TECHNOLOGY AND
PRODUCTS
Product portfolios of the public sector insurers are comparable to those of private sector.
Most new products introduced by foreign insurers are investment-oriented in nature with
HIGH RISKattached and are totally inappropriate in providing social security to the Indian
people, especially for the poor and aamaadmi. These reasons were used by government to
bring in 26% foreign equity and assurances were given that the cap would not be increased- it
is absurd that the very same reasons are now being given to justify increase in FDI limit!
ISSUES IN FDI IN INSURANCE SECTOR:
Efficiency of the companies with FDI: The opening up of this sector for private
participation in 1999, allowed the private companies to have foreign equity up to 26 per cent.
Following this up 12 private sector companies have entered the life insurance business. Apart
from the HDFC, which has foreign equity of 18.6%, all the other private companies have
foreign equity of 26 per cent. In general insurance 8 private companies have entered, 6 of
which have foreign equity of 26 per cent. Among the private players in general insurance,
Reliance and Cholamandalam does not have any foreign equity. The aggregate loss of the
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private life insurers amounted to Rs. 38633 lakhs in contrast to the Rs.9620 crores surplus
(after tax) earned by the LIC. In general insurance, 4 out of the 8 private insurers suffered
losses in 2002-03, with the Reliance, a company with no foreign equity, emerging as the most
profitable player. In fact the 6 private players with foreign equity made an aggregate loss of
Rs. 294lakhs. on the other hand the public sector insurers in general insurance made
aggregate after tax profits of Rs. 62570 lakhs.
2. Credibility of foreign companies: The argument that foreign companies shall bring in
more expertise and professionalism into the existing system is debatable after the recent
incidents of the global financial crisis where firms like AIG, Lehman Brothers and Goldman
Sachs collapsed. Earlier too, The Prudential Financial Services (ICICI’s partner in India)
faced an enquiry by the securities and insurance regulators in the U.S. based upon allegations
of having falsified documents and forged signatures and asking their clients to sign blank
forms. This was after it made a payment of $2.6 billion to settle a class-action lawsuit
attacking wrong insurance sales practices in 1997 and a $ 65 million dollar fine from state
insurance regulators in 1996. AMP closed its life operations for new business in June 2003.
Royal Sun Alliance also shut down their profitable businesses in 2002. A recent report by
Mercer Oliver Wyman, a consultancy, found that European life insurance companies are
short of capital by a whopping 60 billion Euros. According to the Mercer Oliver Wyman
Report the German, Swiss, French and British insurers suffer from severe capital inadequacy,
which is a result of undertaking risky investments in equity and debt instruments in the past.
Hence FDI in Insurance in India would expose our financial markets to the dubious and
speculative activities of the foreign insurance companies at a time when the virtues of
regulating such activities are being discussed in the advanced countries.
3. Greater channelization of savings to insurance: One of the most important duties played
by the insurance sector is to mobilize national savings and channelize them into investments
in different sectors of the economy. However, no significant change seems to have occurred
as far as mobilizing savings by the insurance sector is concerned even after the liberalization
of the insurance sector in 1999. Therefore the private or foreign participation has not been
able to achieve the goal.
4. Flow of funds to infrastructure: The primary aim of life insurance is about mobilizing
the savings for the development of the economy in long term investment in social and
infrastructure sectors. The same vision was argued for the opening up of insurance market
would enable huge flow of funds into infrastructure. But more than fifty percent of the
policies they sell are ULIPS where the investments go into the equity markets. As per a
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report, 95% of policies sold by Birla Sun Life and over 80 percent of policies sold by ICICI
Prudential were unit-linked policies during 2003-04. Under these schemes, nearly 50 percent
of the funds are invested in equities thus limiting the fund availability for infrastructural
investments. On the other hand, the LIC has invested Rs.40,000 crore as at 31.3.2003 in
power generation, road transport, water supply, housing and other social sector activities.
IRDA figures further imply that the share of the public sector life and non-life insurance
companies in investment in infrastructure is greater than their market share. Despite the FDI
cap being set at 26%, the investment from the insurance sector to the infrastructure sector was
predominantly from the public sector companies. Hence the point of raising the FDI cap in
the insurance sector for mobilizing resources does not hold good
COMMENTS OF POLITICAL PARTIES REGARDING RAISING FDI
IN INSURANCE SECTOR IN NIDIA
•
The North Zone Insurance Employees Association (NZIEA)
opposed the
government's proposal to raise the foreign direct investment (FDI) in the insurance
sector from 26 to 48 per cent protesting that the FDI in the sector will mostly benefit
the speculative market and "do no good to the country".
•
Addressing a press conference NZIEA general secretary Anil Kumar Bhatnagar said
that the Centre had recently approved the insurance laws (amendment) bill, 2008, and
it was being proposed to be placed for discussion in the RajyaSabha .Bhatnagar said
that the Parliamentary standing committee headed by former finance minister
YashwantSinhahad unanimously submitted its report on December2013 to the
parliament, and the committee had opposed the increase in FDI in the insurance
sector.
•
The CPI(M), which has been opposing the opening up of the insurance and pension
sectors, said the Cabinet's decisions will make India's finance sector more vulnerable
to speculative finance capital.
ADVANTAGES OF FDI IN INSURANCE SECTOR
1. Capital for expansion: FDI has the potential to meet India’s long term capital
requirements to fund the building of infrastructures which is critical for the development of
the country. Infrastructure has been the major factor which has restricted the progress of the
Indian economy. Insurance sector has the capability of raising long term capital from the
masses as it is the only avenue where people put in money for as long as 30 years even more.
An increase in FDI in insurance would indirectly be a boon for the Indian economy, the
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investments not withstanding but by making more people invest in long term funds to fuel the
growth of the Indian economy.
2. Wider Scope for Growth: FDI in insurance would increase the penetration of insurance in
India, where the penetration of insurance is abysmally low with insurance premium at about
3% of GDP against about 8% global average. This would be better through marketing effort
by MNCs, better product innovation, consumer education etc.
3. Moving towards Global Practices: India’s insurance market lags behind other economies
in the baseline measure of insurance penetration. At only 3.1%, India is well behind the
12.5% for the UK, 10.5% for Japan, 10.3% for Korea and 9.2% for the US. Currently, FDI
represents only Rs.827 core of the Rs.3179 crore capitalizations of private life insurance
companies.
4. Provide customers with competitive products, more options and better service levels:
Opening the FDI in the insurance sector would be good for the consumers, in a lot of ways.
Increasing FDI limit would impact a lot of industries in a positive way and that we could
even do without the FDI in many other sectors for some for example in real estate.
CONCLUSION:
we conclude that the suggested policy stance of enabling a greater role for foreign capital in the
insurance sector, maynot necessarily have the desired impact in view the experience of its
limited role thus far in terms of facilitating investment in infrastructure, deepening insurance
accessibility for the poor and also in developing products suited as a means of providing
social security to the Indian masses at large. On the other hand, increased role of foreign
capital may lead to the possibility of exposing the economy to the vulnerabilities of the global
market by way of likely inheritance of unsound balance sheets and financial health of the
foreign partners through joint ventures and subsidiary routes, flight of capital outside the
country and also endangering the interest of the policy holders. The present global economic
scenario, any further hike in FDI at this juncture may not be in the interest of the Indian
insurance industry, whereby the common man too would not stand to gain through insurance,
particularly as a means of social security
REFERENCES
1. Gujarat National Law University, Gandhinagar, India.
Planning Commission of
India.2002. Report of the Steering Group on Foreign Direct Investment: Foreign
Investment India. Government Report. p11. New Delhi: Planning Commission,
Government
of
India.
Accessed
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http://planningcommission.nic.in.aboutus/committee/strgrp/stgp_fdi.pdf.
on
5th
September, 2008 at 10:34 pm.
2. Foreign Investment Promotion Board (FIPB) has been set up by the government of
India in order to increase the flow of foreign direct investments into the country. FIPB
is the only agency in the country that deals with foreign direct investments and
investments into India. The main objective of Foreign Investment Promotion Board
(FIPB) is to encourage foreign 204 MqJBL (2009) Vol
3. Is
higher
FDI
limit
in
insurance
a
threat
for
public
sector
insurers?zeenews.india.com/.../is-higher-fdi-limit-in-insurance-a-threat-for-p
4. Free
Fdi
in
Insurance
Essay
-
Tejasspawarwww.antiessays.com/free-
essays/313034.html
5. FDI in insurance, a long way to go?
6. business-standard.com › Home › Economy & Policy
7. Big bang reforms: Cabinet approves 49% FDI in insurance, 26% in ...
8. timesofindia.indiatimes.com › Business
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