Insurance Sector in India Insurance Sector in India

The journey of this sector started with life insurance business in 1818 when the Oriental Life Insurance Company was established in Kolkata and that was the important milestones in the Indian Life insurance business. The turning point in this sector was 1912 when The Indian Life Assurance Companies Act came into force for regulating the life insurance business. The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses in the year 1928. To safeguard the interest of prospect, the earlier legislation consolidated the Insurance Act in the year 1938. The turning point was the year 1956, when 245 Indian and foreign insurers and provident societies were taken over by the Central Government and they got nationalized. LIC was formed by an Act of Parliament, viz., LIC Act, 1956. It started off with a capital of Rs. 5 crores and that too from the Government of India. All private life insurance companies at that time were taken over by LIC.

The journey of general insurance business in India started in the year 1850, when the British formed Triton Insurance Company Ltd. in Kolkata. The turning points in the Indian General insurance business includes:

Emerging Trends - The last decade has seen many positive developments in the Indian insurance sector. The policymakers, which comprise the IRDA, RBI, Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in this sector. The sector now compares favourably with banking sectors with regard to growth, profitability and insurance penetration. A few insurance companies have established an outstanding record of accomplishment of innovation, growth and value creation. The Indian insurance companies are changing towards modern insurance system. Modernization in insurance tends to changing services, products and methods of operation. Technology has brought about strategic transformation in the working of insurance companies. With the passage of time, insurance companies are also adding services to their customers. The Indian insurance industry is passing through a phase of customerdriven market. The customers have more choices in choosing their insurance products and companies as well. With stiff competition and advancement of technology, the services provided by insurance companies has become more easy and convenient. All these developments facilitate customers’ delight as well as operational efficiency of insurance companies and reducing operational expenses of insurance services. Competition is compelling insurance companies to be agile and innovate every day. This brings huge transformational changes over the last decade. Liberalization has attracted the entry of the largest insurance companies in the world, who have taken a strategic view on India being one of the top priority emerging markets. Prevailing regulatory environment had path-breaking impact on the development of the industry.

Challenges - The Indian insurance industry which opened up in the year 2001 based on the recommendations saw life insurance in India grow at a scorching phase with LIC consolidating its lead and private players entering life insurance segment. Currently, the growth phase has turned into a consolidation phase not only due to the changes in the external fiscal and economic environment but also due to sweeping regulatory changes. Any major change brings with it the fear of unknown and uncertainly especially if it is not accompanied with growth. Satisfying customers by providing services is a challenging issue in any financial services. Among all financial services, insurance service occupies a prominent position and consumer protection in the insurance sector cannot be underweighted more particularly after recent financial crisis in 2008. Adoption of technology has changed the face of the insurance sector, which is manifest in the various transformational developments of the recent past. The most significant task of the Indian insurance sector is to ensure that insurance products and services are available to every individual in the country efficiently to achieve total financial inclusion. Consumer protection is other aspect of the problems to be addressed.