This article discusses the position of LIC after the advent of private players in the insurance sector. It also talks about the history of insurance, the IRDA, LIC in relation to the private sector, the likely threats and the necessary remedial measures.

The insurance business was established in India in the 19th century with the setting up of the Bombay Mutual Life Insurance Society in 1870. In 1912, insurance was formally regularized with the passing of the Life Insurance Companies Act. A number of small players also entered the field, and when the Insurance Act of 1938 was passed, there were 176 insurance companies. The Life Insurance business was nationalized in 1956 with the formation of the Life Insurance Corporation (LIC) of India, a monopolist which soon grew into a behemoth catering to the life cover risk of the general population. LIC held sway for nearly 50 years, till the opening up of the Indian economy saw the entry of foreign, high profile insurance entities into the country. New collaborations were entered into and the government ensured a level playing field for all by forming the Insurance Regulatory and Development Authority (IRDA) in 1999.

The IRDA was formed with the primary aim to ensure the uniform application of directives and acceptance of the same by LIC as well as by the new entrants in the insurance industry. The government formulated the IRDA as a statutory body to look after and safeguard the interests of all policyholders, and also to prioritize and specify similar guidelines for the different companies in their day-to-day operations. The IRDA is also a watchdog that keeps track of any violations of set parameters by insurers with the requisite authority to impose penalties for any infringement of regulations. The setting up of the ombudsman at the state and national levels is a further extension of its vision to guarantee a fair hearing to policyholders with respect to the claims settlement. The IRDA, today, is a vibrant body, which strikes an equitable balance between the insurance needs within the country and the profit motives of companies that cater to and satisfy those needs. It will play a vital role in the future to raise the industry to its optimum levels of performance.

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