India's life insurance sector boasts of the second largest mobilization
of savings after banks and constitutes 15% of the Gross
Domestic Product (GDP) savings in 2007. Around Rs. 4,00,000
cr of assets are under the management of insurance companies. There
are 20 lakh agents and 2.5 lakh employees working in the insurance
industry. The share of the retail customers to the total is 92%. The future
potential still lies in the rural insurance market, because out of 72% of
rural population, only 12% has an insurance cover. The factors that
support the possibilities for increased penetration of the Indian life
insurance market are the emerging socio-economic changes, increased
wealth, education and awareness of insurance needs. The industry, as such,
is set to emerge independent of being driven merely by tax incentives
for growth. And it is also said to slowly emerge from the shadows of
insurance being almost synonymous with Life Insurance Corporation of India
(LIC). LIC had a monopoly in the life insurance business till the opening up
of the sector in the year 1999-2000 and, even after that, it remains
the largest player in the market.
The life insurance business was nationalized in 1956 by taking over 245 private life insurers and the
General Insurance Corporation (GIC) was established in 1972 by taking over the business of 107 general
insurers. Between 1956 and 1999-2000, LIC was the only public sector life insurer operating the life insurance business.
In general insurance, GIC had four subsidiaries namely, National Insurance, Oriental Insurance, New
India Insurance and United India Insurance. Apart from these two major life and general insurance companies,
there were three more organizations doing insurance business in India, viz., Employees State Insurance,
Deposit Insurance Corporation and Export Risk Insurance Corporation.
However, LIC had complete monopoly over life insurance business and it was intended to serve the
public interest with access to the largest investible funds. In order to regulate the activities of the industry, the
Insurance Regulatory and Development Authority (IRDA) bill was passed by Parliament in December 1999 and
the President of India gave his assent to the same and thus it found the way into the statute books, i.e., exactly
after six years of the submission of Malhotra Committee the work for a complete overhaul of the Indian
Insurance Act, 1938 started. |
