"The purchase of insurance is to protect you from catastrophic disasters, otherwise it will cause financial damage."
In short, insurance can compensate people who suffer losses or accidents. unfortunately. It allows you to protect yourself from everyday health, family and financial risks.
Indian insurance did not have any supervision in the 19th century. This is a typical story of the colonial era: few British insurance companies dominate the market, mainly serving large urban centers. After independence, a dramatic shift. Insurance is nationalized. First, the life insurance company was nationalized in 1956, and then the general insurance business was nationalized in 1972. In 1999 alone, private insurance companies were allowed to re-enter insurance business, accounting for up to 26% of foreign holdings.
"The insurance industry is huge and can be quite daunting. Almost everything can be sold for insurance, everything you can imagine. Determining what is right for you can be a very difficult task."
The concept of insurance already exists. Beyond the scope of tangible assets. Now, due to sudden changes in the currency exchange rate, political turmoil, negligence and liability may also pose a risk of loss.
But if a person invests in insurance for his property before any unexpected accident occurs, he will properly compensate for the damage once he determines the extent of the damage.
The National Bank of India brought new developments to the game with the entry of its bank guarantee proposal. The collective experience of other Asian countries has removed the regulation of the market and allowed foreign companies to participate. If the experience of other countries can be used as a guide, the dominance of life insurance companies and general insurance companies will not disappear quickly.
The purpose of all insurance is to compensate the owner against the loss of his life, property and business due to the various risks he anticipates. There are two main types of insurance: life insurance and general insurance. General insurance refers to fire, sea and miscellaneous insurance, including theft or theft insurance, loyalty guarantees, employer liability insurance, and motor vehicles, livestock and crop insurance.
Life insurance in India
"Life insurance is a heartfelt love letter ever written.
It calms a hungry baby crying at night. It relieves the heart of a widow who lost her loved one.
At the silent moment of darkness at night, this is a comforting whisper. "[19659002LifeInsurancedebutedinIndiaforthefirsttimeinmorethan100yearsItsdistinctivefeaturesarenotaswidelyknowninourcountryastheyshouldbeThereisnolegaldefinitionoflifeinsurancebutitisdefinedasaninsurancecontractandtheinsuredagreestopayacertainamountofpremiumattheappointedtimetakingintoaccountthattheinsureragreestopayacertainamountofinsuranceundercertainconditionsAspecificwayofsandoccurswhenaparticulareventoccursaccordingtothedurationofhumanlife
Life insurance is better than other forms of savings!
"No death. Life insurance promotes life and defeats death.
] This is our premium for the freedom of life after death."
Savings through life insurance guarantee a comprehensive risk of death to the savior protection. In life insurance, when you die, you should pay the full amount (in case there is a bonus), while in other savings plans, you can only pay the amount saved (with interest).
The basic characteristics of life insurance are a) it is a contract related to human life, b) a lump sum payment, c) the amount is paid after a certain period of time expires or the insured person dies. The purpose and purpose of an insurance company to obtain a policy from a life insurance company is to protect the interests of its family members (ie, wife and children), even if the insured person dies prematurely. Any unexpected situation. Even for commercial loans, life insurance policies are generally accepted as collateral.
"Every asset has value, and general insurance business is related to the protection of the economic value of assets."
Non-life insurance refers to insurance other than life insurance, such as fire, sea, accident, Medical, motor vehicle and home insurance. Assets will be created through the efforts of the owner, who can take the form of buildings, vehicles, machinery and other tangible property. Because tangible property has physical shape and consistency, there are many risks, including fire, allied danger, theft and robbery.
General insurance policy is rare:
Property insurance: Housing is the most valuable property. The policy is intended to cover a variety of risks under a single policy. It protects the property and interests of the insured and the family.
Health Insurance: Provides insurance for medical expenses after hospitalization for sudden illness or accident.
Personal Accident Insurance: This policy provides compensation for personal injury or death (partial or permanent) caused by an accident. This includes reimbursement of treatment costs and treatment using hospital facilities.
Travel Insurance: This policy covers the various possibilities that the insured encounters when traveling abroad. It covers the insured's personal accidents, medical expenses and repatriation, lost checked baggage, passports, etc.
Liability insurance: This policy compensates a director or officer or other professional for any damages caused by a claim for misconduct. Act in an official capacity.
Auto Insurance: The Motor Vehicle Act stipulates that every car that travels on the road must be insured, at least only with a liability policy. There are two types of policies, one covering responsibility and the other covering all liability and damage caused by the insurance company to a car.
The journey from baby to teen!
The history of life insurance in India dates back to 1818, when it was considered a means of providing British widows. Interestingly, in those days, the cost of living for Indians was higher than for non-Indians, because the lives of Indians were considered more risky.
The Mumbai Mutual Life Insurance Association opened in 1870. This is the first company to charge. The same premium for Indian and non-Indian living. Oriental Insurance Company was established in 1880. On the other hand, India's general insurance business can be traced back to Triton (Tital) Insurance Co., Ltd., the first general insurance company established in the UK in Kolkata in 1850. . Until the end of the 19th century, almost all of the insurance business was in the hands of overseas companies.
Insurance supervision officially began to implement the 1912 "Life Insurance Company Law" and the 1912 "CPF Law" in India. Several frauds occurred during the 1920s. And the insurance business in India in the 1930s. By 1938, there were 176 insurance companies. The 1938 Insurance Law introduced the first comprehensive legislation that provided strict state control over the insurance business. After independence, the insurance business grew at a faster rate. Indian companies have tightened control of the business, but despite witnessing growth, insurance is still an urban phenomenon.
In 1956, the Indian government brought together more than 240 private life insurance companies and provident fund groups under a state-owned monopoly company and life insurance company. The company (LIC) was born. Nationalization is justified on the grounds that it will create much-needed funds for rapid industrialization. This is in line with the government's choice of national leadership planning and development.
(non-life insurance) insurance business continued to prosper with the private sector until 1972. Their business is limited to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurance companies have merged into four companies – National Insurance Company, New India Insurance Company, Eastern Insurance Company and United India Insurance Company. These are subsidiaries of the General Insurance Company (GIC).
The life insurance industry was nationalized under the Indian Life Insurance Company (LIC) Act. In some ways, LIC has become very prosperous. Whether it is a monopoly, it has about 60-70 million policy holders. Given that India's middle class is about 2.5-300 million, LIC has successfully occupied about 30% of it. About 48% of LIC's customers come from rural and semi-urban areas. This may not happen if the LIC's charter does not specify a target for serving rural areas. India’s high savings rate is one of the external factors that have helped LIC grow rapidly in recent years. Although India's savings rate is high (compared to other countries with similar levels of development), Indians show a high degree of risk aversion. Therefore, nearly half of the investment is tangible assets (such as real estate and gold). About 23% are (low-yield but safe) bank deposits. In addition, approximately 1.3% of GDP is spent on savings instruments associated with life insurance. This number doubled between 1985 and 1995.
Worldview – Indian Life Insurance
In many countries, insurance is a form of savings. In many developed countries, a large part of domestic savings is the donation insurance scheme. This is not surprising. The prominent position of some developing countries is even more surprising. For example, South Africa ranks second. India is located between Chile and Italy. This is even more surprising given the level of economic development in Chile and Italy. Therefore, we can conclude that despite the low per capita income, India still has an insurance culture. This is conducive to future development. Specifically, insurance (especially life) may grow rapidly as income levels rise.
Insurance Industry Reform:
Committee Report: One Known, One Anonymous!
Although the Indian market has been privatized and opened until 1991, insurance is not restricted in two ways for foreign companies in multiple industries. The government wants to be cautious. Under the pressure of the opposition, the government (then led by the Congress Party) decided to set up a committee led by Mr. RN Malhotra (the then Governor of the Reserve Bank of India).
] A report issued by the Malhotra Commission in 1994 proposed liberalization of the Indian insurance market, indicating that the market should be open to the private sector and ultimately to the foreign private sector. It also investigated the satisfaction of LIC customers. Curiously, customer satisfaction seems to be high.
In 1993, the Malhotra Committee, headed by the former Minister of Finance and RBI Governor R. N. Malhotra, was established to assess the Indian insurance industry and recommend its future direction. The Malhotra Committee was established to complement the reform of the financial sector. The purpose of the reform is to create a more efficient and competitive financial system that adapts to economic needs, taking into account the structural changes that are currently taking place, and recognizing that insurance is an important part of the overall financial system and that it is necessary to meet similar reform. In 1994, the Commission submitted a report, some of which included:
The government bet on insurance companies will be reduced to 50%. The government should take over ownership of GIC and its subsidiaries so that they can act as independent companies. All insurance companies should be given greater freedom of operation.
Private companies with a minimum paid-up capital of Rs 1 billion should be allowed to enter the industry. No company should handle life and general insurance through a single entity. Foreign companies can be allowed to enter the industry in cooperation with domestic companies. Postal life insurance should be allowed to operate in rural markets. Only one state-level life insurance company is allowed to operate in each state.
o The regulatory body
should amend the "insurance law". An insurance regulatory agency should be established. Insurance controller – part of the finance department – should be independent.
The mandatory investment of LIC Life Fund in government securities will be reduced from 75% to 50%. GIC and its subsidiaries must not hold more than 5% of the shares in any company (the current shareholding will fall to this level for a period of time).
o Customer Service
LIC should pay interest on late payments for more than 30 days. Insurers must be encouraged to establish pension plans linked to the unit. Computerized operations and updates will be carried out in the insurance industry. The committee stressed that in order to improve customer service and increase coverage of insurance policies, the industry should open up competition. At the same time, however, the committee believes it is necessary to be cautious because any failure of new competitors may undermine public confidence in the industry. Therefore, it was decided to compete in a limited manner by setting a minimum capital requirement of Rs. 100 crore.
The Commission considered it necessary to provide insurance companies with greater autonomy to improve their performance and enable them to act as independent, economically motivated companies. To this end, it proposes to set up an independent regulatory body – the Insurance Regulatory and Development Agency.
The reform of the insurance sector was initiated when the IRDA Act passed the Parliament in December 1999. Since its inception, IRDA was established in April 2000, and statutory bodies have been insisting on the development of regulations and timetables for registering private sector insurance companies.
Since its establishment as an independent statutory body, IRDA has established a framework for global compliance regulations. Another decision to provide support systems for the insurance industry, especially life insurance companies, was the launch of the IRDA online service to issue and renew licenses to agents. Organizations that approve training for agents also ensure that insurance companies will have a well-trained insurance agent to sell their products.
The Indian government began to open its insurance industry in March 2000. The Insurance Regulatory and Development Authority (IRDA) Act removes all access restrictions on private participants, allowing foreign companies to enter the market and has some restrictions on foreign direct ownership. According to the current guidelines, foreign partners of insurance companies have a 26% stake. It has been suggested to increase this limit to 49%.
The opening of the industry may lead to the proliferation and deepening of insurance in India, which may also include the restructuring and revitalization of public sector companies. In the private sector, there are 12 family life insurance and 8 general insurance companies registered. Since 2001, many private insurance companies operating in the life and non-life insurance sectors have begun to sell their insurance policies
The Malhotra Committee report was issued immediately after the establishment of a new committee, the Mukherjee Committee for the new The requirements of the established insurance company to develop a specific plan. The Mukherjee Committee’s recommendations have never been disclosed to the public. However, based on the filtered information, the Commission recommends including certain ratios in the insurance company's balance sheet to ensure accounting transparency. However, the finance minister opposes it, and he may, based on the advice of some potential competitors, believe that it may affect the prospects of an emerging insurance company.
Law Commission of the Indian Law Commission on Amending the Insurance Act 1938 – Report of the 190th Legal Committee
On June 16, 2003, the Law Commission issued a consultation paper on the revision of the 1938 Insurance Law. The last work to amend the Insurance Law in 1938 was promulgated at the time of its promulgation in 1999. The Insurance Regulatory Development Authority Act of 1999 (IRDA Act)
The Commission conducted this activity in the context of a policy change that allowed private insurers to be in the life and non-life insurance sectors. There is a growing need to strengthen regulatory mechanisms, even while streamlining existing legislation, to remove parts that have become redundant due to recent changes.
In the main areas of change, the consultation paper makes the following recommendations:
one. Merging the terms of the IRDA Act with the Insurance Law to avoid multiple legislation;
b. Remove the redundant and provisional provisions of the 1938 Insurance Law;
c. The amendments reflect policy changes that allow private insurance companies and strengthen regulatory mechanisms;
d. Provide strict specifications for maintaining “solvency margin” and investment by public sector and private sector insurance companies;
e. Provide a comprehensive grievance redress mechanism, including:
o The composition of the grievance reduction agency (GRAs) consisting of one judicial and two technical members to deal with the insured's complaint/claim for the insurance company (the GRA is expected to replace Existing insurance company designated ombudsman system);
o Appointed officials by IRDA to determine and levy penalties for breach of contract insurance companies, insurance agents and insurance agents;
o proposed for IRDA, GRAs Appeal and referee officials to the Insurance Appeals Tribunal (IAT), the Supreme Court Judge (current or retired) / Chief Justice of the High Court, and two other members with sufficient insurance experience;
o Objections to the Supreme Court A statutory appeal decided by IAT.
Life and non-life insurance – development and growth!  As a regulatory agency, the Insurance Regulatory Development Agency Act, 2006 was an important year for the insurance industry, laying the groundwork for free pricing general insurance in 2007, and many companies announced plans to enter the industry.
Domestic and foreign participants strongly pursued the long-term expectation of increasing the FDI limit from 26% to 49%, and before the end of this year, the government submitted the “Comprehensive Insurance Act” to the ministerial group for strong retention. In the case of deliberation. From the left. The bill may be discussed at the parliamentary budget meeting.
The penetration rate of health and other non-life insurance in India is much lower than the international level. These facts indicate the huge growth potential of the insurance industry. Last year the government proposed to limit foreign direct investment to 49%. Since such interest rate hikes require legislative changes, they have not yet been implemented. Since the opening of the insurance industry in 1999, foreign investment in the rupee. 8.7 billion have entered the Indian market and 21 private companies have obtained permits.
The involvement of private insurers in various industry sectors has increased as they account for some of the early public underwriting. Departmental insurance companies have also created additional commercial boulevards. To this end, public sector insurers are unable to take advantage of their inherent advantages to obtain additional premiums. In the 2004-05 premium growth, private insurance companies still accounted for 66.27% despite a 20% market share.
Life insurance industry recorded premium income of 82,854.80 million rupees in fiscal year 2004 – 2005 was 666,653 million rupees in the previous fiscal year, with a growth rate of 24.31%. In the first year of premiums, single and premium premiums contributed a total of 15,881.33 rupees (19.16%); 10,336.30 rupees (12.47%); and Rs. 566,713 rupees (68.36%). In 2000-01, when the industry was opened to private companies, life insurance premiums were Rs. 34,898.48 crore, which was made up of rupees. The first year of premiums was 699.695 billion rupees, Rs. 25191.07 million renewal premium and rupee. A single premium of 2740.45 million rupees. After the opening, the single premium fell from 994 million rupees in 2001-02 to 567.444 billion rupees in 2002-03-03, and the guaranteed return policy was cancelled. Although it rose slightly in 2003-04 to 593.65 billion rupees (4.62% growth) in 2004-05, however, a single premium income rose to the rupee, a major shift. Rs 10,336.30 million, an increase of 74.11% over 2003-04.
The size of the life insurance market has increased with economic growth and per capita income. This led to a favorable increase in the total premiums of LIC (18.25%) and new insurance companies (147.65%) in 2004-05. The higher growth rate of the new insurance company is the lower base in 2003-04. However, the market share of the new insurance company increased from 4.68 in 2003-04 to 9.33 in 2004-05.
In the case of public sector insurance companies, the division's sensible fire, maritime and other sectors were split to Rs.241.13 billion, Rs. 98.299 billion and Rs. 10,577.59 crore, ie growth (-) 1.43%, 1.81% and 6.58% . Public sector insurers report growth in the automotive and health sectors (9% and 24%). These sectors account for 45% and 10% of the underwriting business of public sector insurance companies. Fires and “others” accounted for 17.26% and 11% of the insured premiums. Aviation, liability, "other" and Fire's negative growth were 29, 21, 3.58 and 1.43%, respectively. In other countries that opened concurrently with India, foreign companies accounted for 22% of the market in the life sector and about 20% of the general insurance sector. The share of foreign insurance companies in other competitive Asian markets does not exceed 5% to 10%.
The life insurance sector is growing at an unprecedented rate, while the general insurance industry is growing faster. Two new players joined life insurance – Shriram Life and Bharti Axa Life – to increase the total number of life players to 16. A newcomer was injected into the non-life sector in the form of independent health insurers Star Health and Allied. Insurance, bringing non-living participants to 14 years old.
Many companies, mainly state-owned banks (about 14), such as the Bank of India and the Punjab National Bank, have announced plans to enter the insurance industry, some of which have also established joint ventures.
The proposed change in the FDI cap is part of a comprehensive revision of the Insurance Act – the Insurance Act of 1999, the LIC Act of 1956 and the IRDA Act of 1999. After the insurance law is amended, LIC will be able to maintain reserves, and insurance companies can raise resources other than equity.
About 14 banks are lining up to enter the insurance industry, while in 2006 there were several joint venture announcements, while others were ERS. Bank of India works with Union Bank and Japanese insurance professional Dai-ichi Mutual Life, while PNB works with Vijaya Bank and Principal for life insurance. Allahabad Bank, Karnataka Bank, Indian Overseas Bank, Dabur Investment Company and Sompo Japan Insurance Company have established a non-life insurance company, while Maharashtra Bank and Shriram Group and South Africa's Sanlam The group has established a non-life insurance joint venture.
It seems cynical that LIC and GIC will die of death in the next decade or two. IRDA takes the approach of "the speed of snails". It is very cautious when granting licenses. It sets fairly stringent standards for all aspects of the insurance business (with the possible exceptions). Regulators always go well. Too many regulations can stifle the motivation of new immigrants; too loose regulations can lead to failures and fraud, leading to nationalization. India is not unique in developing countries where insurance is open to foreign competitors.
Insurance business is at a critical stage in India. In the next few decades, we may see high growth in the insurance industry for two reasons: financial deregulation can always accelerate the development of the insurance industry, and the growth of per capita GDP also contributes to the development of insurance business.
Source by Sowmya Suman