Insurance organizations Their status, types, working and strategies for commercial viability

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Life and Non-Life Insurance Companies in India

Historical Overview:

Life Insurance:

  • 1818: The Oriental Life Insurance Company was established in Calcutta, marking the beginning of life insurance in India.
  • 1912: The Indian Life Assurance Companies Act was enacted as the first legislation to regulate the life insurance sector, laying down rules for the functioning of life insurance companies.
  • 1928: The Indian Insurance Companies Act was introduced to collect data and monitor the life and non-life insurance sectors.
  • 1938: The Insurance Act was consolidated and amended to enhance the protection of policyholders' interests, ensuring better regulation of the insurance business.
  • 1956: The Government of India nationalized 245 insurance companies and provident societies, leading to the creation of Life Insurance Corporation of India (LIC) under the LIC Act of 1956 with an initial capital of ₹5 crore.

Non-Life Insurance (General Insurance):

  • 1850: Triton Insurance Company Ltd., the first general insurance company, was founded in Calcutta.
  • 1907: Indian Mercantile Insurance Ltd. was established as the first company to offer all types of general insurance services.
  • 1957: The General Insurance Council was created to set ethical standards and business practices for the general insurance sector.
  • 1968: The Insurance Act was amended to regulate investments, set minimum solvency margins, and establish the Tariff Advisory Committee to oversee insurance rates.
  • 1972: The General Insurance Business (Nationalisation) Act nationalized the general insurance industry, merging 107 insurers into four major companies and forming General Insurance Corporation (GIC).

Insurance Sector Reforms:

Malhotra Committee (1993):

  • Purpose: To reform the insurance sector, making it more efficient and competitive, in line with broader financial sector reforms.
  • Key Recommendations:
    • Government Stake: Reduce the government's stake in insurance companies to 50% and allow GIC's subsidiaries to operate independently.
    • Competition: Permit private and foreign insurers; ensure no single entity deals in both life and general insurance; encourage Postal Life Insurance in rural areas; and allow only one state-level life insurer per state.
    • Regulatory Body: Establish an independent Insurance Regulatory Authority; amend the Insurance Act to improve regulation.
    • Investments: Lower mandatory investment in government securities from 75% to 50% and limit GIC and its subsidiaries' holdings in any single company.
    • Customer Service: Mandate interest payments for delayed claims, encourage unit-linked pension plans, and advance technology and computerization in the industry.

Major Policy Changes:

  • IRDA Act, 1999:Established the Insurance Regulatory and Development Authority (IRDA) to regulate and promote the insurance industry.
    • Private Sector Entry: Allowed private insurers with a minimum paid-up capital of ₹100 crores; foreign investment was capped at 26% (increased to 49% in 2014).
    • Regulations: IRDA introduced 27 regulations covering insurer registration, solvency margins, rural and social sector obligations, investments, and policyholder protection.

Key Players:

Life Insurers :- 

Public Sector:

  • Life Insurance Corporation of India (LIC): The largest and oldest life insurance company in India. Website

Private Sector:

  • Allianz Bajaj Life Insurance: A joint venture with Allianz SE. Website
  • Birla Sun Life Insurance: A subsidiary of Aditya Birla Capital Ltd. Website
  • HDFC Standard Life Insurance: A leading private life insurer. Website
  • ICICI Prudential Life Insurance: A joint venture between ICICI Bank and Prudential plc. Website
  • SBI Life Insurance: Part of the State Bank of India group. Website
  • Others: Max New York Life, MetLife, Kotak Mahindra, Tata AIG, etc.

General Insurers :-

Public Sector:

  • National Insurance Company: Offers a range of general insurance products. Website
  • New India Assurance: A leading public sector general insurer. Website
  • Oriental Insurance: Provides various general insurance products. Website
  • United India Insurance: Offers diverse general insurance solutions. Website

Private Sector:

  • Bajaj Allianz General Insurance: Offers a wide range of general insurance products. Website
  • ICICI Lombard General Insurance: Provides comprehensive general insurance services. Website
  • IFFCO-Tokio General Insurance: A joint venture between IFFCO and Tokio Marine. Website
  • Reliance General Insurance: Offers various general insurance products. Website
  • Others: Royal Sundaram, Cholamandalam, HDFC Chubb, etc.

Reinsurer:

  • General Insurance Corporation of India (GIC): Provides reinsurance services to insurers. Website

Protection of Policyholders:

  • Regulations: IRDA has implemented regulations to safeguard policyholders’ interests, including:
    • Policy Documents: Must be in easily understandable language.
    • Claims Procedure: Defined procedures for processing claims.
    • Grievance Redressal: Insurers must have grievance redressal systems.
    • Solvency Margins: Insurers must maintain solvency margins to meet claim obligations.
    • Transparency: Clear disclosure of policy benefits and terms; advertisements should be truthful.
    • Interest on Delays: Insurers are required to pay interest on delayed claims.

Future Outlook:

  • Growth Factors: Increasing income, purchasing power, and insurance awareness are expected to drive sector growth.
  • Government Schemes: Initiatives like Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) aim to enhance insurance coverage for lower-income groups.
  • Emerging Trends: The sector is likely to see innovation in products, multi-distribution channels, improved claims management, and ongoing regulatory developments.

The Indian insurance sector has undergone significant changes from its nationalized past to a liberalized market with increased competition and improved regulatory frameworks. The future promises further growth driven by economic development, technological advancements, and enhanced insurance coverage.