The insurance sector in India reopened itself for private companies on the recommendation of R.N. Malhotra, the former RBI Governor in 1994, following the Liberalization, Privatization and Globalization (LPG) announced in the New Economic Policy 1991. In his recommendation, he suggested that the foreign insurance company can participate through joint-ventures with Indian private companies in the insurance sector. The Malhotra committee made the historical recommendation to establish a regulatory for the insurance sector and in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. In April, 2004, IRDA was incorporated as a statutory body with the objectives of promotion of Insurance service, spreading awareness on financial security through insurance market, enhancing consumer satisfaction through increased consumer choice and lower premiums.
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%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests. 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 re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
Today there are 33 General/Non-Life insurance companies and 24 life insurance companies operating in our country who compete on price and services to attract customers, whereas, there are two reinsurance companies. With the entry of foreign companies, the insurance industry has been spurred by product innovation and vibrant distribution channels, coupled with targeted publicity and promotional campaigns by insurers. Some remarkable achievements of the sector after the IRDA’s establishment is as under:
Achievements towards Industry expansion:
Achievements towards Social Security and Social Infrastructure Building:
The Premium collection through the new business in this sector shows the insurance market share by the Public sector insurance company LIC and the private players. In both the cases the new business premium collection is upward trending (Refer Chart-1).
In chart -2, the total premium collection including the existing policies are presented. This is also showing an uptrend in the total premium collection.
Dr. Tushar Panigrahi, Assistant Professor, Unitedworld School of Business (UWSB)
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