LIBERALISATION OF INSURANCE SECTOR

(Project Report)

Submitted to:

Dr. Y. Papa Rao

(Assistant Professor)
(FACULTY OF LAW OF INSURANCE)

Submitted By:
Shivanshu Bais
B.A. LLB (Hons.)
Semester-VIII, Sec-B, Roll No. 152

Submitted on: 06.04.2018

Hidayatullah National Law University

Uparwara post, Abhanpur, New Raipur (C.G)

I
 DECLARATION

I hereby declare that the project work entitled “LIBERALISATION OF

INSURANCE SECTOR” submitted to HNLU, New Raipur, is a record of an

original work done by me under the guidance of DR. Y. PAPA RAO, Faculty
Member, HNLU, Raipur.

SHIVANSHU BAIS Date - 06.04.2018

Semester VIII
Roll No: 152
Section-B

II
 ACKNOWLEDGEMENTS

I feel highly elated to work on the project “LIBERALISATION OF INSURANCE

SECTOR”. The practical realization of the project has obligated the assistance of many persons.

First of all, I express my deepest gratitude towards Dr. Y. PAPA RAO, Faculty of Law of
Insurance, to provide me with the opportunity to work on this project. His able guidance ship and
supervision in terms of his lectures were of extreme help in understanding and carrying out the
nuances of this project.

I would also like to thank The University and the Vice Chancellor for providing extensive
database resources in the library and for the internet facilities provided by the University.

Some typography or printing errors might have crept in, which are deeply regretted. I would be
grateful to receive comments and suggestions to further improve this project.

Shivanshu Bais

Semester-8

Roll No.- 152

Section- B

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 CERTIFICATE

This is to certify that Shivanshu Bais, Roll Number- 152, Student of Semester- VIII of B.A.
LL.B.(Hons.), Hidayatullah National Law University, New Raipur (Chhattisgarh) has undergone
research of the project work titled “ Liberalisation of Insurance Sector” in fulfillment of the
subject of Law of Insurance. The research work is an original and bona fide research work
carried out by him. The work is fit for evaluation. His performance in research work is up to the
level.

__________________

Dr. Y. PAPA RAO

Faculty – Law of Insurance
Hidayatullah National Law University, Raipur
Date – 06th April 2018

IV
 CONTENTS

Subject Matter Page number

Declaration II
Acknowledgement III
Certificate IV
Chapter 1- Introduction 1
Objective, Methodology 3-5
Chapter 2- Insurance Sector: An 6
overview
Chapter 3- Opening up of Insurance 8
Industry
Chapter 4- Liberalisation of Insurance 11
Sector
Chapter 5- Hurdles of Insurance sector 17
Conclusion 18
References 19

V
 CHAPTER-1
INTRODUCTION

Insurance may be described as a social device to reduce or eliminate risk of loss to life and
property. Under the plan of insurance, a large number of people associate themselves by sharing
risks attached to individuals. The risks which can be insured against, include fire, the perils of
sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at
a premium commensurate with the risk involved. Thus collective bearing of risk is insurance.

DEFINITION :

General definition:

In the words of John Magee, “Insurance is a plan by which large number of people associate
themselves and transfer to the shoulders of all, risks that attach to individuals.”

Fundamental definition:

In the words of D.S. Hansell, “Insurance may be defined as a social device providing financial
compensation for the effects of misfortune, the payment being made from the accumulated
contributions of all parties participating in the scheme.”

Contractual definition:

1
In the words of justice Tindall, “ Insurance is a contract in which a sum of money is paid to the
assured as consideration of insurer’s incurring the risk of paying a large sum upon a given
contingency.”

Characteristics of insurance :

 Sharing of risks
 Cooperative device
 Evaluation of risk
 Payment on happening of a special event
 The amount of payment depends on the nature of losses incurred.

2
 RESEARCH METHODOLOGY

The research methodology used for the present research article is traditional Doctrinal research
method and is primarily descriptive and analytical. As most of the information can be sought
form the secondary sources such as available literature by referring books, articles, journals,
websites & other reference as guided by faculty of Law of Insurance are primarily helpful for the
completion of this project.

OBJECTIVES

 To find out origin and growth of insurance sector.

 To find out why insurance industry is important.
 To find out why insurance should be opened up to private players.

REVIEW OF LITERATURE

Insurance has become an essential financial instrument today. But still, it is restricted to certain
class. Though with time, the growth of life insurance has increased. To make this clearer, certain
existing studies have been gone through intensively. The concluding parts of those studies are
explained below:
Truett and Truett (1990) analyzed the demand for life insurance in Mexico and USA; over the
period of 1960-1984, using regression model as analytical tool. The variables were two types:
dependent and independent. The dependent variable was taken as quantity demanded of life
insurance and independent variables were taken as: age, education and real per capita income.
Major findings of the study revealed that all independent variables were significant determinants
for life insurance demand. Further, the study confirmed that income elasticity for life insurance
demand. It was found much higher in Mexico than USA. The study finally concluded that
population of lower level income had higher income elasticity for demand of life insurance than
the higher ones. Rao (1999) reviewed the main objectives of nationalization (1956) of Indian life
insurance sector. It was to provide insurance coverage to every sections of the society. This study

3
confirmed its low contribution and pointed out a certain huge potential in near future. Further,
this study showed that life insurance business is an important tool for channelizing the savings of
people to national development programs.
Karunagaran (2006) concluded that Indian economy has more than 1.2 billion population with
low level of penetration and density. The study pointed out that bigger size of Indian population
is still remaining out of reach to insurance coverage; especially in rural area. The study found
that there is huge potential in insurance market; particularly for widening the distribution
channels. The study suggested bancassurance strategy can prove more significant in this
direction. Strazewski (2006) reported that up to early 1960s in India group insurance
development was insignificant. The study found that many employees realized that they were
underinsured with limited employer-paid life insurance and personal coverage. Furthermore; the
study found that many employers were reluctant to allow agents and brokers direct access to
employees to promote the insurance coverage. The study concluded the need to participate in
employee’s benefits communications, to understand their actual need. Singh and Kumar (2012)
analyzed the life insurance premium of LIC and seven private life insurers; which were ICICI,
HDFC, Bajaj, SBI, Reliance, BIRLA and Kotak. Time period was taken from 2000-01 to 2009-
10. The variant difference method, Levene test and t-statistic were used for data analysis. The
study concluded that private insurers with innovative products, policyholder’s friendly
distribution channels and with effective customer relationship management. These factors are
forcing the LIC to restructure its customary strategies. Kumar and Priyan (2012) compared the
Indian public and private life insurers, using data of 23 insurers over the period from 2002-03 to
2009-10. The variables were taken as, fresh business premium, number of new policies issued
and total life insurance premium. The Mann-Whitney U test and Growth Rate were used for data
analysis. Major findings of the study were that there was no significant difference in the growth
rates of fresh business premium and in the growth rate of new policies issued between public and
private. There was significance difference in the growth rate of total life insurance premium
between the public and private. Overall study concluded that LIC was still a dominant player in
the Indian life insurance sector.

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 NATURE OF STUDY

“Doctrinal (Non-Empirical) Method of Research” has been relied upon for conducting the
research. For the purpose of research Books, Law Reporters, Case laws, Journals and other
references as guided by the Faculty of Law of Insurance have been relied upon. It is a research of
analytical and descriptive nature .

SOURCES OF STUDY

Most of the information has been taken from the available literature such as the secondary data
available in the Public Libraries in the form of documents such as the Government Gazettes,
Statutes, Law Reports, books, journals, research articles for preparation of this article.

CHAPTERISATION

 Chapter 1- The first chapter deals with introduction of the subject matter and includes
research methodology, objects and limitations.
 Chapter 2- It deals with origin and growth of Insurance Sector.
 Chapter 3- It gives special emphasis on opening up of Insurance industry.
 Chapter 4-It deals with liberalization of Insurance Sector.
 Chapter 5- It deals with hurdles of Insurance sector.

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 CHAPTER- 2

Insurance sector : An overview

Life brings with it a lot of surprises some pleasant but some are not. In fact, we are living in the
world of uncertainty. We live only by knowing very little about the future while problems of life
arise from the fact which is not known exactly. In life, everything is uncertain but one thing is
certain that is death, again its age, time, and manner is not certain1 . In such scenario, importance
of insurance cannot be ignored where uncertainty is prevailing everywhere. Moreover, its
importance is not limited to an individual, a family or a business, but to whole economy across
the world2. An efficient insurance sector provides an important and unique benefit to the
households, projects, business, Government and to the financial sector3. Insurance sector is
utmost crucial for all groups and sectors of an economy4.

A thriving insurance sector is of vital importance to every modern economy. Firstly because it
encourages the habit of saving, secondly because it provides a safety net to rural and urban
enterprises and productive individuals. And perhaps most importantly it generates long- term
invisible funds for infrastructure building. The nature of the insurance business is such that the
cash inflow of insurance companies is constant while the payout is deferred and contingency
related. This characteristic feature of their business makes insurance companies the biggest
investors in long-gestation infrastructure development projects in all developed and aspiring
nations. This is the most compelling reason why private sector (and foreign) companies, which
will spread the insurance habit in the societal and consumer interest are urgently required in this
vital sector of the economy. Opening up of insurance to private sector including foreign
participation has resulted into various opportunities and challenges in India.

The basic human trait is to be averse to the idea of taking risks. There is always an urge to
minimize the risks and take protection against possible failure. The risk includes fire, the perils

1
IRDA Journal, 2004 and Bishnoi, 2004
2
Gopalakrishnan, 1993
3
German Insurance Association, 2004
4
Mohanakumar, 2004
6
of sea, death and accidents and burglary. Any risk may be insured against at a premium
commensurate with the risk involved. Thus collective bearing of risk is insurance. Insurance,
whether life or non-life, provides people with a reasonable degree of security and assurance that
they will be protected in the event of a calamity or failure of any sort.

Origin and Growth of Insurance sector

Insurance in modern form originated in the Mediterranean during the 13th century. The earliest
references to insurance have been found in Babylonia, the Greeks and the Romans. Marine
insurance is the oldest form of insurance followed by life insurance and fire insurance. Life
insurance activity in its modern form started in India in 1818 to provide for English widows
when oriental life Insurance Company was incorporated at Calcutta, followed by Bombay Life
Assurance Company in 1823 and Tritron Insurance Company for General Insurance in 1850.
Insurance regulation formally began in India through the passing of two acts, the Life Insurance
companies Act of 1912 and the Provident Fund Act of 1912. However the first comprehensive
legislation was introduced with the Insurance Act of 1938 that provided strict state control over
insurance business in the country. After independence, the business of India Insurance grew at a
faster place as competition amongst the Indian companies intensified. The decision of
nationalization of life insurance business took place in 1956 when 245 India and foreign
insurance provident societies were first merged and then nationalized. It paved the way towards
the establishment of Life Insurance was to raise the much needed funds for rapid
industrialization and self-reliance in heavy industries. General Insurance followed suit and 1968;
the Insurance Act was amended to allow for social control over the general insurance business.
Subsequently in 1973, non-life insurance business was nationalized and the General Insurance
Business (Nationalization) Act, 1972 was promulgated.

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 CHAPTER-3

WHY OPEN UP THE INSURANCE INDUSTRY ?

An insurance policy protects the buyer at some cost against the financial loss arising from a
specified risk. Different situations and different people require a different mix of risk-cost
combinations. Insurance companies provide these by offering schemes of different kinds.
Unfortunately the concept of insurance is not popular in our country. As per the latest estimates,
the total premium income generated by life and general insurance in India is estimated at around
a meagre 1.95% of GDP. However India’s share of world insurance market has shown an
increase of 10% from 0.31% in 1996-97 to 0.34% in 1997-98. India’s market share in the life
insurance business showed a real growth of 11% thereby outperforming the global average of
7.7%. Non-life business grew by 3.1% against global average of 0.20%. In India insurance
spending per capita was among the lowest in the world at $7.6 compared to $7 in the previous
year. Amongst the emerging economies, India is one of the least insured countries but the
potential for further growth is phenomenal, as a significant portion of its population is in services
and the life expectancy has also increased over the years. The nationalized insurance industry has
not offered consumers a variety of products. Opening of the sector to private firms will foster
competition, innovation, and variety of products. It would also generate greater awareness on the
need for buying insurance as a service and not merely for tax exemption, which is currently
done. On the demand side, a strong correlation between demand for insurance and per capita
income level suggests that high economic growth can spur growth in demand for insurance. Also
there exists a strong correlation between insurance density and social indicators such as literacy.
With social development, insurance demand will grow.

Future course of Insurance Business :

One of the main differences between the developed economies and the emerging economies is
that insurance products are bought in the former while these are sold in latter. Focus of insurance
industry is changing towards providing a mix of both protection / risk over and long-term
investment opportunities. Some of the major international players in the insurance business,

8
which might try to enter the Indian market, are – Sun Life of Canada, Prudential of the United
Kingdom, Standard Life, and Allianz etc. Although the insurance sector is officially open to
private players, they still need a license from the IRDA. Following might be the future strategies
of insurance companies.

(1) The new entrants cannot compete with the state owned LIC on price alone. Due to its
size, LIC operates at very low costs and their premia on policies that offer pure
protection are on a par with comparable schemes across the globe. What the new
insurance companies will probably offer is higher returns than the annualized 9-10% one
can hope to earn from LIC’s policies. This will put pressure on LIC to offer more
attractive returns.
(2) Consumers can also expect product innovations. For instance, at present, LIC provides
cover for permanent disability and what the new companies could offer is temporary
disability insurance as well.
(3) Apart from the basic term insurance, most insurance products worldwide are sold as
long-term investment opportunities with the protection component being clearly spelt
out in the scheme.
(4) LIC’s policies are not flexible according to the customer’s needs. New entrants have
planned to offer universal life and variable life insurance products that allow the holder
flexibility in deciding how his premia are split between protection and savings. New
products would also enable product combinations that allow greater customisation.
(5) Private insurers would compete furiously on the service platform. These would not only
include faster claims settlement and other after-sales service but there agents would be
trained in pre-sales interaction to usher in a customer-oriented approach. They would be
better qualified in assisting clients in financial planning.
(6) Foreign companies would also use superior software (like APEX) that will give them an
edge over the in-house LIC software. This technology will help private insurers in
product development and customising products to suit individual needs.
(7) The foreign players will probably introduce a lot of innovation and competition on
Surrender value. LIC pays surrender value only after three years but private insurance
companies are likely to offer sops by way of better and timely surrender value to clients.

9
(8) Access to insurance too will probably become more widespread. Role of intermediaries
would decrease and sale of insurance through direct channels and banks would increase.
Simple products like term insurance might be sold through the telephone or direct mail
to high net worth clients.
(9) In reaction to foreign player’s strategies one might expect LIC to react and drop its
premia and upgrade its services.

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 CHAPTER-4

LIBERLISATION OF INSURANCE SECTOR

The decision to allow private companies to sell insurance products in India rests with the
lawmakers in Parliament. These are the passage of the Insurance Regulatory Authority (IRA)
Bill, which will make IRA a statutory regulatory body, and amending the LIC and GIC Acts,
which will end their respective monopolies. In 1994 the government appointed a committee on
insurance sector reforms (which is known as the Malhotra Committee) which recommended that
insurance business be opened up to private players and laid down several guidelines for
orchestrating the transition.

This raises three questions:

(a) Why should insurance be opened up to private players?

(b) If opened up, what should be the appropriate market structure (many unregulated players
or a few regulated players); and finally,

(c) What is the role of the regulator in insurance business?

Why allow entry to private players?

The choice between public and private might amount to choosing between the lesser of two evils.
An insurance contract is a "promise to pay" contingent on a specified event. In the case of
insurance and banking, smooth functioning of business depends heavily on the continuation of
the trust and confidence that people place on the solvency of these financial institutions.
Insurance products are of little value to consumers if they cannot trust the company to keep its
promise. Furthermore, banking and insurance sectors are vulnerable to the "bank run" syndrome,
wherein even one insolvency can trigger panic among consumers leading to a widespread and
complete breakdown. This implies the need for a public regulator, and not public provision of
insurance. Indeed in India, insurance was in the private sector for a long time prior to
independence. The Life Insurance Corporation of India (LIC) was formed in 1956, when the
Government of India brought together over two hundred odd private life insurers and provident

11
societies, under one nationalized monopoly corporation, in the wake of several bankruptcies and
malpractice’s'. Another important justification for Nationalisation was to raise the much-needed
funds for rapid industrialization and self-reliance in heavy industries, especially since the country
had chosen the path of state planning for development. Insurance provided the means to mobilize
household savings on a large scale. LIC's stated mission was of mobilizing savings for the
development of the country.

The non-life insurance business was nationalized in 1972 with the formation of General
Insurance Corporation (GIC). Thus the fact that insurance is a state monopoly in India is an
artifact of recent history the rationale for which needs to be examined in the context of

liberalization of the financial sector. If traditional infrastructure and "semi-public goods"

industries such as banking, airlines, telecom, power, and even postal services (courier) have
significant, private sector presence, continuing a state monopoly in provision of insurance is
indefensible. This is not to deny that there are some valid grounds for being cautious about
private sector entry. Some of these concerns are:

(a) That there would be a tendency of private companies to "skim" the markets; thus private
players would concentrate on the lucrative mainly urban segment leaving the unprofitable
segment to the incumbent LIC.

(b) That without adequate regulation, the funds generated may not be deployed in sectors (which
yield long-term social benefits), such as infrastructure and public goods; similar without
regulation, private firms may renege on their social sector investment obligations. Meeting these
concerns requires a strong regulatory body. Another commonly expressed fear is that there
would be massive job losses in the industry as a whole due to computerization. This however
doesnot seem to be corroborated by the countries' experience'. Moreover, apart from
consideration based on theoretical principles alone, there is sufficient evidence that suggests that
introduction of private players in insurance can only lead to greater benefits to consumers. This
can be seen from the fact that the spread in insurance in India is low compared to international
benchmarks. The two convention measures of the spread of insurance are penetration and
density. The former measure (premiums per unit) of GDP, and the latter, premiums per capita.
Less than 7% of the population in India has life insurance cover. In Singapore, around 45 per

12
cent of the people are covered and in Japan, this is close to 100 per cent. In the US, over 81 per
cent the households have insurance cover. India has the biggest life insurance sector in the world
if we go by the number of policies sold, but the number of policies sold per 10 persons is very
low. The demand for insurance is likely to increase with rising per-capita incomes, rising literacy
rates and increase of the service sector, as has been seen from the example of several other
developing countries. In fact, opening up of the insurance sector is an integral part of the
liberalization process being pursued by many developing countries. After Korean and Taiwanese
insurance sectors were liberalized, the Korean market has grown three times faster than GDP and
in Taiwan the rate of growth has been almost 4 times that of its GDP. Philippines opened up its
insurance sector in 1992. There are several other factors that call for private sector presence.
Firstly, a state monopoly has little incentive to innovate or offer a wider range of products. This
can be seen by a lack of certain products from LlC's portfolio, and lack of extensive risk
categorization in several GIC products, such as health insurance. In fact, it seems reasonable to
conclude that many people buy life insurance just for the tax benefits, since almost 35 per cent of
the life insurance business is in March, the month of financial closing. This suggests that
insurance needs to be sold more vigorously. More competition in this business will spur firms to
offer several new products, and more complex and extensive risk categorization. The system of
selling insurance through commission agents needs a better incentive structure, which a state
monopoly tends to stifle. For example LIC pays out only 5 per cent of its income as
commissions, whereas this share in Singapore is 16 per cent, and in Malaysia it is close to 20
percent. Private sector presence will also mean that the current investment norms, which tie up
almost 75 per cent of insurance funds in low yielding government securities, will have to go.
This will result in more proactive and market oriented investment of funds. This needs to be
tempered by prudential regulation to ensure solvency'. Of course, this also implies that cross-
subsidizing across policyholders of different types that is seen both in life and non-life insurance
will diminish. Since public sector firms are required to sell subsidized insurance to weaker
sections of society, a separate subsidy mechanism will have to be designed. The India
Infrastructure Report (GOI, 1996) estimates that the funds required in the next two decades are
more than Rupees 4000 billion. Finally, private sector entry into insurance might be simply a
fiscal necessity. Since large scale funds form long term contractual savings need to be mobilized,

13
especially for investment in infrastructures the option of not having more (private) players in the
insurance sector is too costly.

WHAT SHOULD BE THE MARKET STRUCTURE ?

Individuals buying an insurance contract pay a price (called the "premium") to the insurance
company and the insurance company in turn provides compensation if a specified event occurs.
By making such contractual arrangements with a large number of individuals and organizations
the insurance company can spread the risk. This gives insurance its "social" character in the
sense that it entails pooling of individual risks. The price of insurance i.e., the premium is based
on average risk. This premium is too high for people who perceive themselves to be in a low risk
category. If the insurer cannot accurately determine the risk category of every customer and
prices insurance on the basis of average risk, he stands to lose all the low risk customers. This in
turn increases the average risk, which means premia have to be revised upwards, which in turn
drives away even more customers and so on. This is known as the problem of "adverse
selection". Adverse selection problem arises when a seller of insurance cannot distinguish
between the buyer's type i.e., whether the buyer is a low risk or a high type. In the extreme case,
it may lead to the complete breakdown of insurance market. Another phenomenon, the problem
of "moral hazard" in selling insurance, arises when the unobservable action of buyer aggravates
the risk for which insurance is bought. For example, when an insured car driver exercises less
caution in driving, compared to how he would have driven in the absence of insurance, it
exemplifies moral hazard. Given these problems, unbridled competition among large number of
firms is considered detrimental for the insurance industry. Furthermore, even the limited
competition in insurance needs to be regulated. Insurance companies can differentiate among
various risk types if there is a wide difference in risk profile of the buyers insuring against the
strong insurers. It also called for keeping life insurance separate from the general insurance. It
suggested the regulation of insurance intermediaries by IRA and the introduction of brokers for
better ‘professionalisation'.

14
THE ROLE OF IRA :

(a) The protection of consumers’ interest,

(b) To ensure financial soundness of the insurance industry and
(c) To ensure healthy growth of the insurance market.
These objectives must be achieved with minimum government involvement and cost. IRA’s
functioning can be financed by levying a small fee on the premium income of the insurers thus
putting zero cost on the government and giving itself autonomy.

( a ) Protection of Customer Interests :

IRA’s first brief is to protect consumer interests. This means ensuring proper disclosure, keeping
prices affordable but also insisting on some mandatory products, and most importantly making
sure that consumers get paid by insurers. Ensuring proper disclosure is called Disclosure
Regulation. Insurance contracts are basically contingency agreements. They can be full of
inscrutable jargon and escape clauses. An average consumer is likely to be confused by them.
IRA must require insurers to frame transparent contracts. Consumers should not have to wake up
to unpleasant surprises, finding that certain contingencies are not covered. The IRA also has to
ensure that prices of products stay reasonable and certain mandatory products are sold.

( b ) Ensuring Solvency of Insurers :

There are basically three ways of ensuring enough solvencies.

First is the policy of a price floor.

Second is the restriction on capital and reserves, i.e., on what kind of investments and
speculative activities firms can make.

Third is putting in place entry barriers to restrict the number of competitors.

( c ) Promoting Growth in the Insurance Industry :

15
A society experiences many benefits from the spread of insurance business. Insurance
contributes to economic growth by enabling people to undertake risky but productive activity. In
the past, growth of trade has been facilitated by the development of insurance services. One only
needs to look at the history of insurance to see how evolution of insurance helped trade flows
along various trade routes. Promotion of insurance also provides for long-term funds, which are
utilized to fund big infrastructure projects. IRA can ensure growth of insurance business with
better education and protection to consumers, and by making the insurance business a level
playing field. They can also support Indian insurance companies in the international field. IRA
thus has to frame the rules, design procedures for enforcement and also make operational
guidelines. All this with virtually no relevant historical data makes the task very difficult. An
initial conservative approach (the bloodhound) is justified since there is no prior experience to
fall back on, and it would be prudent to err by regulating more’ rather than less. As experience
accumulates, the IRA can relax its initial harsh stance and adopt a more accommodating stance
(the watchdog). Regulation is always an evolutionary process and experience constantly has to
feed into policy making. Care must be taken so that this process does not slow down and cause
regulatory lags. IRA can also consider allowing banks to act as agents (as opposed to
underwriters of insurers in mass base types of products.

16
 CHAPTER-5

HURDLES OF INSURANCE SECTOR

The insurance industry has been growing between 15 and 20 percent, but it lags far behind its
global counterparts.

This was due to the following reasons. .

1. Insurance companies create products and go out to find customers. They do not create
products that the market wants.

2. Insurance awareness among the general public is low.

3. Term- Insurance Plants are not promoted.

4. Unit -linked assurances are not available.

5. Insurance covers are expensive. Inefficient management and low investment yield are
responsible for the high premium charged by Indian Insurance companies Investment
restrictions have been responsible for 10w yields.
6. Returns from Insurance Products are low.

7. There is a dearth of innovative and buyer-friendly insurance products.

8. Most agents and development officers are interested only in producing new business
servicing existing customers satisfactorily has not been a priority for them the obvious
reason to this, is that incentives are them the obvious reason to this is that incentives are
based on new business generation and not on satisfactory serving of existing Customers it
is surprise to note that more than 10% of LIC policies are surrendered or get lapsed every
year.

9. There is no market research worth the name and computerization is woefully inadequate.

17
 CONCLUSION

A thriving insurance sector is of vital importance to every modern economy. Firstly because it

encourages the habit of saving, secondly because it provides a safety net to rural and urban

enterprises and productive individuals. And perhaps most importantly it generates long- term

invisible funds for infrastructure building.

Collective bearing of risk is insurance. Insurance, whether life or non-life, provides people with a

reasonable degree of security and assurance that they will be protected in the event of a calamity

or failure of any sort.

The needs of the nation and its people have finally prevailed and privatization of insurance is

now a reality towards further liberalization of the Indian economy. With the opening up of the

industry after reforms, private sector operators in collaboration with their overseas partners are

likely to bring in a more professional and focused approach. Hence, in this millennium,

insurance industry is likely to play an important role in changing the economic landscape of the

country. However the success of the insurance industry will primarily depend upon meeting the

rising expectations of the consumers who will be the real king in the liberalized Insurance market

in future.

18
 REFERENCES

1. Mahesh Chandra Garg, New Paradigms in Indian Insurance Industry, Yojana, Vol.45,
No.7, April 2001, pp.27-32.
2. Ojha. A.K., Globalization & Liberalization – prospects of new world order, Third conce
An International Journal of Ideas, August-2002.

3. Jalan, Bimal 1996. India’s Economic Policy: Preparing for the Twenty-First Century.
Penguin Books, New Delhi

4. https://www.researchgate.net/publication/290438725_GROWTH_OF_LIFE_INSURAN
CE_SECTOR_IN_PRE_AND_POST_LIBERLIZATION_IN_INDIA_GROWTH_OF_L
IFE_INSURANCE_SECTOR_IN_PRE_AND_POST_LIBERLIZATION_IN_INDIA

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