Introduction:
The company secretaries have a very important role to play in the insurance sector. A company secretary works as a compliance officer in a particular insurance company and makes sure that regulatory and supervisory issues are being solved.
The insurance industry in India has established back in the time when businesses were tightly regulated into the hands if only a few public sectors insurers. Insurance is that which describes the act of guarding against any risk. An insured is a party who will seek to obtain an insurance policy while an insurer is a party that shares the risk for a paid price called an insurance premium.
Re-insurance is the word that is used when the insurance company guards themselves against the risk of loss. There has been a notice of an increase in the entry of international insurance during a new era of insurance development. By the mid of 2004, the number of insurers in India has been increased by the entry of new private-sector employees to a total of 28. There has been a launch of a plethora of new products to cater to the different segments of the market whereas on the other hand the traditional agents were supplemented by other channels like banks and internet these developments increase the business growth, in real terms, of 19% in life premium and an 11.1% in non-life premiums between 1999 and 2003.
The objectives of this report are to explore the development and regulation of India’s insurance business and to enumerate and explore the challenges present in this vast business.
An Overview of India’s Insurance Market
India’s share in the global insurance market was 1.92% during 2018. However, in 2018 the total insurance premium in India increased to a total of 9.23 per cent. Oihn life insurance businesses, India is ranked the 10th place among 88 countries, for which the data is given by Swiss Re[1]
Total real premium growth rate in 2018
At the end of 2003, the Indian insurance market was the 19th largest in the world[2]
Projection of life and non-life insurance premiums from 2007 to 2011
These are the projections of life insurance and non-life premiums of the year 2007 to 2011[3]
The insurance companies in India still remain at a very early stage of development due to the rapid growth of the sector over the last few decades.
The dynamic growth of insurance buying is also partly affected by the income elasticity of insurance demand. It has been shown and proven that the insurance penetration and the per capita income have a very strong non-linear relationship.[4]
India in the International Context
Insurance premium in Asia, 2003 USD Billions
(Source: Nation Insurance Statistic; Swiss Re Economic Research and consulting preliminary estimates.)
Insurance Penetration: it is the premium as a percentage of the GDP (gross domestic product). In simple words, it’s the ratio of premium underwritten in a particular year to the GDP.
When in comparison to the international context, the insurance premium of India is quite low. But in the year 2003, India stood in the 11th position for the highest insurance penetration in Asia and ranked 54th worldwide.
The Indian insurance market or business has bagged the 10th position globally and has ranked the 5th place in Asia after Japan, South Korea, China and Taiwan.[5]
Foreign market share is defined as the premium share that is being collected by the foreign majority-owned insurers which consist of the subsidiaries and the branches.
Non-life Business
The non-life business in India is very similar to the other developing economies of the world. The motor and the fire acts as a backbone of the non-life business in India. The non-life business has also contributed to the overall premium growth. There has always been an upward growth in the sales of motor vehicles.
History of Insurance Development in India
The insurance business has been one of the most fast-growing sectors in India since independence. The nationalisation of the business sector started in the year 1956 and all the business relating to insurance was taken over by the central government. The life insurance corporation act was enacted in the year 1956 with an exclusive business of life insurance.
Life insurers
Public sector- Life Insurance Corporation of India (LIC)
Private sector- Allianz Bajaj Life Insurance Company Limited, Birla Sun Life Insurance Company Limited, HDFC Standard Life Insurance Company Limited, ICICI Prudential Life Insurance Company Limited, Max New York Life Insurance Company Limited, MetLife Insurance Company Limited, SBI Life Insurance Company Limited, Tata AIG Life Insurance Company Limited, Aviva Life Insurance Company Pvt Limited, Sahara India Life Insurance Company Limited Non-life insurers.
Non-life insurers
Public sector- National Insurance Company Limited, New India Assurance Company Limited, Oriental Insurance Company Limited, United India Insurance Company Limited, Export Credit Guarantee Corporation, Agriculture Insurance Company of India Limited.
Private sector- Royal Sundaram Alliance Insurance Company Limited, Tata AIG General Insurance Company Limited, Cholamandalam General Insurance Company Limited.
In 1870 the Bombay Mutual Life Assurance Society, was the first Indian life insurance company that started its business.
Modern-day insurance
The modern form of life insurance came into effect to India from England in the year 1818. The Oriental Life Insurance Company started by the Europeans in Calcutta was the first one in the Indian Territory.
The purpose of those life insurances at that time was brought up with the motive of serving the needs of the European community. In the year 1912, the Life Insurance Company’s Act along with the Provident Fund Act was passed. The insurance companies act ensured that the premium rates and periodical valuations of the companies on many accounts put the Indian companies at a disadvantage.
Insurance Act, 1938
In order to protect the interests of the Indian insurance companies, the above act was amended and the insurance act, 1938 came into force. It comprises of the provisions for the effective control over the activities of the insurers or insurance organizations.
Non-life insurance
It’s also known as general insurance. It is a form of insurance mainly concerned with protecting the policyholder from loss or damage caused by specific risks.
- Agricultural: farmers use crop insurance to reduce or manage various risks associated with the growing of crops.
- Aviation: insurers against the hull (main body of the plane), spares, etc.
- Car insurance: primarily to provide protection to car owners against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.
- Engineering: insurance is on an ‘all-risks’ basis and in particular includes fire, lightning, explosion, aircraft damage, riot, strike, malicious acts, faults in erection, human errors, negligence.
Regulation of insurance business in India
The insurance regulatory and development authority (IRDA) has been constituted in April 2000, in order to regulate and develop the insurance industry. The main objective of the IRDA is to promote a healthy competition so that customer satisfaction increases through an increase in the choice. It is also taken care that the financial security of the insurance market remains confidential. The general insurance corporation of India was converted into national re-insurer and its subsidiaries got restructured. Now we have a total of 33 General Insurance Corporation of India which includes 6 health insurance companies and 24 life insurance companies functioning in India.
Regulations governing insurance business in India
- Insurance rules of 1939
- Insurance Act of 1938
- Insurance Laws (Amendment) act of 2015
- Insurance Ombudsman Rules of 2017
- IRDA Act of 2000
- Indian Stamp Act of 1899.
Role of Regulator
The Insurance Regulatory and Development Authority of India (IRDAI) acts as the Regulator for all the insurance companies within the territory of India. The main objective of the IRDAI is to protect the interests of the policyholders and also to promote competition and growth of the insurance companies. It is compulsory for every insurance company to register with the IRDAI and to receive a Certificate of Registration in order to start an insurance business. The IRDAI has the right or power to investigate and prevent any insurer to stop doing the business.
Conclusion
India is one of the most promising insurance markets in the world. Yet in India, there is no balance between the investment flexibility and the insurance solvency. But there is always a belief that we will overcome this in the near future. Private insurers have an important role to play in serving a large number of informal sector workers. Finally, the insurance company should be promising and have to show long-term commitment to the sector.
References:
[1] Swiss Re, Sigma No. 3/2019
[2] Swiss Re, Sigma No. 3/2004
[3] Swiss Re economic research and consulting
[4] Rudolf Enz, “The S-curve relation between per-capita income and insurance penetration, “Geneva Papers on Risk and Insurance: Issues and Practice, Volume 25, No 3, July 2000, p 396-406.
[5] Swiss Re, Sigma No 3/2004 world insurance in 2003: “insurance industry on the road to recovery”
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