The Insurance Sector Reforms in India: Ashish Kumar
The Insurance Sector Reforms in India: Ashish Kumar
The Insurance Sector Reforms in India: Ashish Kumar
1, 81-84 (2014)
Received November 2013; Acceptance February 2014
Abstract
The insurance sector plays a vital role in the economic development of India. It acts as a
mobilization of savings, financial intermediary, investment activities, risk manager and stabilizer
of financial markets. The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market. The Insurance sector
reforms were started with the incorporation of IRDA again in 2000. IRDA opened up the market
with the application for registration. Foreign companies were allowed ownership of upto 26%.
There is a proposal to increase the limit upto 49%. The key objective of the IRDA includes
promotion of competition and to enhance the customer satisfaction through increased consumer
choice and lower premium, while ensuring the financial security of the insurance sector. Though
as at end of September 2013, there were fifty two insurance companies operating in (forty four in
private sector and 8 in public sector). Life insurance industry recorded a premium income of Rs.
287202.49 crores in 2012-13 as against Rs. 287072.11 crores in 2011-12 registering a growth of
0.05 per cent. The life insurance industry reported a net profit of Rs. 6948 crores during the year
2012-13 as against of Rs. 5974 crores net profit during the year 2011-12. The public sector
companies reported a net profit of Rs. 2603 crores where as private sector insurance reported a
net profit of Rs. 679 crores during the year 2012-13.
Key words: IRDA, insurance, private sector, public sector
Introduction
The economic liberalization in India started on
24th July 1991. After Independence in 1947, India
adhered to socialist policies. In the 1980s, Prime
Minister Rajiv Gandhi initiated some reforms and later
the government of Mr. P.V. Narasimah Rao and his
finance minister Manmohan Singh started break
through reforms. But an unmanageable Balance of
Payment and a socially intolerably high rate of inflation
pressurized the government to launch massive
economic reforms in 1991. Reforms in the Insurance
Sector were initiated with the passage of the IRDA
Bill in the Parliament in Dec. 1999. The IRDA since
its incorporation as a statutory body in April 2000 has
fastidiously struck to its schedule of framing regulations
and registering the private sector insurance companies.
It has put in a frame work of globally compatible
regulations and also provided the supporting systems
to the insurance sector.
An Overview of the Indian Insurance Sector
82
Krishnan Nair.
With the passing of IRDA Act in 1999, reforms
in insurance sector were initiated in India. IRDA
incorporated as a statutory body in April 2000 and
brought about several crucial policy changes. The goals
of IRDA are to safeguard the interests of insurance
policy holders, as well as to initiate different policy
measures to help sustain growth in Industry. This
Authority has notified 27 Regulations on various issues
like Registration of insurers, Registration of Insurance
agents, Re-insurance, solvency margin, obligation of
insurers to rural and social sector etc.
IRDA opened up the market in August 2000 with
the invitation for applications registration. Foreign
Companies are allowed ownership upto 26%. The
Authority has power to frame regulations under
Section-114-A of the Insurance Act, 1938 and from
2000 onwards framed various regulations ranging from
registration of companies for carrying on insurance
business to protection of policy holders interests.
Today there are 24 life Insurance companies, 27
General Insurance companies and one Reinsurance
company operating in India. Table 1 below exhibits
the number of registered Life, General and Reinsurance
Insurance companies in India as on 30th September
2013 in public as well as Private Sector.
Table 1: Registered Insurances in India (As on 30th September 2013)
_________________________________________
Type of
Public Sector Private Sector Total
_________________________________________
Life Insurance
1
23
24
General Insurance6
21
27
Reinsurance
1
0
01
Total
8
44
52
_________________________________________
Present Scenario
83
84
References
Annual reports of LIC from 2001-10, 2010-11, 2011-12,
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Mishra, M.N. (2008 Edition). Insurance Principles and
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Narain, D.S. (2001) Insurance Sector Reforms-Must
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Rajendran, R. and Natranjan, B. (2010). The impact of
liberalization, privatization and globalization on Life
Insurance Corporation of India.
Rao, C. S. (2007). The Regulatory Challenges Ahead
Sasidharan Sanjeev (2005). Insurance Sector in India.
Vadlamannati, K.C. (2008). Do Insurance Sector Growth
and Reforms Affect Economic Development-Empirical
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