Until recently, insurance services in India were provided by the public sector organizations-life insurance by the Life Insurance Corporation (LIC) of India, and general insurance by the General Insurance Corporation (GIC) of India and its 4 subsidiaries. The insurance industry was opened up to the private sector in August 2000. The primary objective of liberalisation in the insurance sector was to deepen insurance penetration by enlarging consumer choices through product innovation.
According to Economic Survey (Government of India), 2012-13, since the opening up of the insurance sector, the number of participants in the insurance industry has gone up from 7 insurers in 2000 to 52 insurers as on September 30, 2012 operating in the life, non-life, and re-insurance segments. Of the 23 insurance companies that have set up operations in the life segment, 21 are in joint ventures with foreign partners. Of the 21 private insurers who have commenced operations in the non-life segment, 18 are in collaboration with foreign partners.
The increased competition, with the arrival of private players, has led to rapid product innovations for catering to the diverse requirements of the various segments of the population. Besides, statutory commitments in respect of weaker sections of society, competitive pressures are pushing life insurers to adopt innovative marketing strategies to extend insurance penetration, especially targeting lower income groups.
Insurance business in India had, in the past, remained underdeveloped with low levels of penetration. Post-liberalization, the sector has succeeded in raising the levels of insurance penetration from 2.7 (life 2.15 and non-life 0.56) in 2001 to 4.1 (life 3.4 and non-life 0.7) in 2011.
Despite the recent growth of the insurance sector, insurance penetration in India remains low as compared to other developing countries of the world. The key policy challenge required at the current stage is to ensure the financial stability of the new insurers, while at the same time encouraging entrepreneurship, product innovation and increasing insurance density, especially in rural and semi-urban areas.
This book provides a comprehensive account of various aspects of insurance industry in India, focusing on insurance laws, procedures, and product and pricing strategies of insurance companies to successfully operate in the new competitive environment.