Insurance Sector in India

Insurance sector is one the most important financial intermediary in India. This sector helps in mobilizing savings of general public to financial assets. Insurance sector also act as a stabilizer and it helps people in the situation of crisis. Insurance penetration is very low in India; it is well below the standards of U.S.A. Before liberalization Public sector insurance companies had the monopoly over the market. Due to lot of private sector Company’s entry post liberalization number of people with insurance cover have improved significantly but it still fall below the satisfactory levels. Indian insurance sector at present has 52 companies. Insurance sector can be broadly divide into two sectors; life insurance and non-life insurance sector. Out of these 52 companies 24 are working in life insurance sector and 28 are working in non-life sector. Private sector entry in insurance sector was allowed in 1999. Before that sector had only public sector players like life insurance cooperation, General insurance cooperation etc.

Reforms of 1999 in insurance sector can be divided as following:-

• Opening of sector for private companies.
• Foreign direct investment up to 26 percent was allowed in this sector.
• Insurance regulatory and development authority was created to regulate and develop this sector.

After reforms first decade of 21st century has been very good for the insurance sector in India. Insurance sector witnessed many remarkable changes after the reforms. In the case of general insurance industry the premium had grown from Rs.9450 crs in 1999-2000 to Rs.25,000 crs in 2006-07. The private sector has acquired a market share of 40% and most of it came by reducing the percentage share of the public sector. Insurance sector faces new challenges of 21st century and it is in dire need for another set of reforms. Major problems in insurance sector are:-

• Rising cost of insurance products.
• Slowing growth and insufficient penetration throughout India.
• No new major reforms for almost a decade.

In order to remove the shortcomings of insurance sector government in 2012 announced 12-point revival package for this sector. Important among those are:-

• IRDA to consider 30-Day norm for clearing the product.
• All banking correspondents will be allowed to sell the insurance products.
• Reduction in service tax on first year regular premium as well as single premium policies.
• Some insurance products will be used for tax exemption.
• Exemption of premium for social security insurance schemes from service tax.
• IRDA to evolve and notify guidelines for reduction in arbitrage between UNITS and traditional products.

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