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Ijems V3i1p102 PDF
Ijems V3i1p102 PDF
Dr.Boonyasai (1999) In his Ph.D expansion of company with new or more products or
dissertation ― The effect of liberalisation and services, and cheaper production facilities. The host
deregulation on life insurer efficiency‖, examines that country receives foreign funds for development,
competition not only leads to economic efficiency but transfer of new profitable technology, wealth of
it also improves service quality of insurers by way of expertise and experience and increased job
innovative products at greater variety of choices for opportunities‘ (Horold D skipper, Jayaram,
the benefit of buyer. The study covers the insurance Chalapathi Rao -2011).
market of Korea, The Philippines Taiwan and
Thailand. It was concluded that liberalisation creates As a financial service, Insurance is an
competitive market and stimulates the growth of the integral part of national economy and a strong pillar
insurance industry. of financial market. Ample of studies suggests that
insurance contributes materially to economic growth
Harsh Kapoor in his article ―FDI in by improving the investment climate and promoting a
insurance: For better future‖ focus on the more efficient mix of activities that would be
Opportunities and challenges in the Indian insurance undertaken in the absence of risk management
industry by analysing SWOT of insurance sector. The instruments (Tapen Sinha 2004). Insurance serves a
paper focuses on the factors which act as growth number of valuable economic functions that are
drivers of insurance industry. The study finds that largely distinct from the functions served by other
rising income of middleclass, societal changes, types of financial intermediaries. United Nations
urbanisation and financial sophistication are the Conference on Trade and Development (UNCTAD)
major growth drivers of insurance industry. pronounced that a sound insurance and re-insurance
market is an essential characteristic of economic
KaveriBansal and Mona Bansal (2009) growth.
Expressed their findings in an article published in
Indian Banker, that Liberalisation of the industry, The waves of liberalisation, privatisation and
resulting in growing competition and increasing globalisation have deeply influenced the insurance
number of players has made branding an essential market worldwide. With the increase in Trade, Direct
ingredient of the insurance business. Insurance Investment and Portfolio Investment, there has been
companies are leveraging upon the brand awareness an ever growing demand for Insurance services
and equity banks, thus enhancing customer particularly in the emerging markets. Globalisation of
receptiveness for insurance products. Insurance market, as a part of the overall process of
liberalization in emerging and other countries enabled
Tapen Sinha (2004) in his article the foreign insurance companies to enter in those
―Insurance sector in India: Towards 2020 vision‖ countries and benefited both. The driving forces of
assessed macro economic trends which support for insurance market globalization have been identified
the development of insurance sector in India. In 1950, by Swiss Re (Sigma No.4/2000) as the ‗push factors‘
the savings and investment rate in India was around and ‗Pull Factors‘. The Push factors are the motives
10% of GDP and they have risen to around 25% of behind the movement of foreign insurance companies
GDP by 2000 and there is a potential for further while the pull factors are the motives behind allowing
growth of savings and investment rates. The author the foreign companies to operate in local market.
examined the relation between insurance and GDP in
India. A tentative conclusion of Tapen Sinha was that VI. INDIAN SCENARIO
a rise of one percent of real GDP leads to a rise of The Indian insurance industry is more than
two percent of rise in insurance demand in the 150 years old. It has witnessed many phases of the
context of India. The paper concludes that rising working from the days when there were many private
education level, technological innovations, cheaper sector companies initially and then moved to
and faster communication and globalisation are the nationalisation and again to the private sector. The
major factors which will act as growth engines of Indian insurance industry was opened for private
insurance and economic development of India. insurers in the year 1999, with the enforcement and
establishment of industrial regulatory and
V. FOREIGHN DIRECT INVESMENT IN development authority Act (IRDA). The first stage
INSURANCE reforms in insurance industry started with the
Most of the economists and analysts opine enactment of IRDA and permitting the private players
that FDI helps for the economic development of the to get register to write up insurance business with
nation. ‗Foreign direct Investment is profitable both FDI cap of 26% ( now it is 49%). Insurance sector
to the country receiving investment and the investor. was privatized with objective of creating healthy
For the investor company FDI offers an exclusive competition in the industry and to meet the needs of
opportunity to enter into the international or global stakeholders.
business, new markets and marketing channels,
elusive access to new technology and expertise, and
The insurance laws (Amendment) Act 2015 VII. FDI IN INSURANCE AND ITS BENEFITS
and hike in FDI cap from 26% to 49% is a second Insurance Regulatory and Development
stage reforms in insurance sector. The Act is aimed to Authority permitted global insurers to setup and
allow insurance companies to generate capital and to register a domestic company to undertake insurance
generate resources for business. The life insurance business in India. However regulations stipulate that
industry is capital intensive, and insurers are required they should have a capital base of at least US $20
to infuse capital at regular intervals to meet the million and their investment in such company is
expenses like, training costs for development of the capped at 26 percent (now it is 49%). Thus to
distribution channels, creating niche market, participate in the market they must form a joint
expansion of branches etc.. The experience of the venture with an Indian partner that is able to invest
insurance markets globally indicates that companies the remaining funds.
in the life sector take seven to ten years to break-even
.Against this backdrop there was a huge demand from The entry of private players with FDI has led
private insurers to hike FDI cap from 26% to 49%, to tremendous changes in Indian life insurance
and it was approved by the Government by the industry. Since opening up, the number of
enactment of Insurance laws (amendment) Act 2015. participants in the industry has gone up from seven
The Act will also enable empowering IRDA to insurers in the year 2000 to 52 insurers in 2014,
regulate key aspects like solvency, Investment operating in the life, non-life and re-insurance
structure, operational expenses and commissions of segments. As at the end of September 2014, there are
insurance companies. 24 life insurance companies operating in India, of
which one is LIC the state owned Life Insurance
Corporation and the remaining 23 are in private
sector. The given table shows total amount of FDI
inflows in insurance sector.
growth in FDI
7000
6000
5000
4000
3000
growth in FDI
2000
1000
0
The value of t is calculated by using the given boost the industry, whereas in public sector only a
equation. few Executives are in favour of FDI in insurance.
IX. CONCLUSION
Life insurance industry is different from
other financial services as it needs to have a long
term relationship with its customers. Moreover the
life insurance business is highly complex with the
evolving statutory regulations. Foreign Direct
Investment in insurance may bring product
innovation and technological innovation but at the
same time it brings a Plethora of risks. An
unwarranted increase in the number of private players
in the industry will inevitably exposes the country to
risks. Policy makers have the most important role to
play. Increase in size of foreign holding should not
be open to all insurers; there should be some criteria
and strategies in liberalizing FDI polices. The
Regulatory body IRDA has been empowered with the
insurance laws (amendment) Act - 2015 and it is time
SAMPLE - 1
to execute its powers in order to monitor and regulate
X=2.52 (MEAN VALUE)
the insurance industry in the interest of policy holders
SAMPLE - 2
and other stakeholders of the industry.
X= 4.3 (MEAN VALUE)
When the values are substituted for the above
REFERENCES
equation, t- value will be— T= 12.71 [1] Alburqurque (2003) The composition of international
Where S D for Sample 1 = 1.31 and S D for Sample capital flows-Risk sharing through FDI – Journal of
2= 1.24 international economics Vol61, 2003
Significance at 5%, df-14, Table value= 2.145. [2] Ashvin parekh & chandajit banergee (2010) Indian
Insurance sector-stepping into the next decade of growth.
As the calculated values is more than the table value, [3] Dr. Boonyasai T. (1999) The effect of liberalisation and
the Null Hypothesis is rejected and alternative deregulation on life insurance efficiency- Ph.D
hypothesis is accepted which means there is a dissertation, George State University.
significant differs in the opinion of executives of [4] Dr. S A Saiyed (2012) Effect of FDI on Economic Growth
in India. PARIPEX Indian journal of Research. PP 25-28.
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insurance companies. The study reveals that stagnate – A report
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of FDI and they opine that hike in FDI will further markets- issues and concerns- Washington, International
insurance foundation
[7] Harsh Kapoor- (2012) ―FDI in insurance: For better future [12] IRDA Annual reports
[8] Kishore kumar meena (2011) FDI in life insurance [13] R Rajendran and B Natarajan (2010) The impact of
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[10] Mahantha Devajit (2012) Impact of FDI on Indian Generating growth in a challenging economy takes
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[11] IRDA Journal – The insurance laws (amendment) Act [15] Tapen Sinha (2004) Insurance sector in India towards
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