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Introduction
The journey insurance process in India is now over seven years old. The first major milestone in this journey has been passing Insurance Regulatory and Development Authority Act 1999. This combined with changes in the Social Security Act, 1983, LIC and GIC Post paves the way for the entry of private players and possible privatization of public monopolies here lic and GIC. Opening up the insurance to the private sector, including foreign participation has resulted in a variety of opportunities and challenges.
Term Insurance
In our daily life, when it is aimlessly participation risk. Instinct security against such risks is one of the main catalysts to determine the attitude. As an extension of this quest for security, the concept of insurance must have been born. The urge to provide insurance or protection against loss of life and property must have introduced people to make some sort of sacrifice willingly to achieve security through mutual cooperation. In this sense, the story of insurance is probably as old as human history.
Life insurance provides protection in particular home against the risk of premature death of their income earning member. Life in modern times also provide protection from other life-related risks such as longevity (ie the risk of outliving of source of income) and risk disabilities and health insurance (health insurance). The products provide for longevity are pensions and annuities (insurance against old age). Life insurance provides protection against accidents, property damage, theft and other liabilities. Non-life insurance contracts are typically shorter compared to life insurance contracts. The bundling together of coverage and saving of risk is peculiar life insurance. Life insurance provides both protection and investment.
Insurance is a boon to business concerns. Insurance short range and long range relief. In the short-term relief is designed to protect the insured against loss of property and lives by spreading losses among the number of subjects through the medium of professional risk bearers as insurers. It makes businessmen face unexpected losses and that he need not worry about possible loss. The long-range object to economic and industrial growth of the country by making the investment of large funds offered by insurers in organized industry and commerce.
General Insurance
Before virtualization nation General insurance industry in 1973 GIC Act was passed in Parliament in 1971, but it was implemented in 1973. It was 107 General insurance companies including branches of foreign companies operating in the country upon nationalization, these businesses were combined and grouped into the following four subsidiaries Gic such as National Insurance Co.Ltd, Calcutta. The New India Assurance Co. Ltd, Mumbai; The Oriental Insurance Co. Ltd., New Delhi and United India Insurance Co. Ltd., Chennai and now delinked.
General insurance business in India is broadly divided into fire, marine and various Gic apart from direct handling Aviation and reinsurance carry out comprehensive Crop Insurance Scheme, insurance, Social Security Scheme etc. The Gic and its subsidiaries in accordance with the the aim of nationalization to spread the message far and wide insurance and provide insurance protection of the weaker sections of society are making efforts to design new covers and also to popularize other non-traditional business.
liberalization of Insurance
The comprehensive management of insurance business in India was brought into effect with the enactment of the Insurance Act, 1983. It tried to create a strong and powerful control and authority of the Controller insurance power to manage, advise, investigate, register and terminating insurance etc. However, accompanying the nationalization of insurance, most regulation measures were taken away from the Controller and Insurance in the hands of the insurers themselves. Government of India in 1993 had set up a high powered committee by RNMalhotra, former Governor, Central Bank of India, to study the structure of the insurance industry and recommend changes to make it more effective and competitive keeping in view the changes in other structural parts of the financial system in the country.
Proposals Malhotra Committee
committee submitted its report in January 1994 recommending that private insurers be allowed to co-exist with government companies like LIC and GIC companies. This recommendation had been requested by various factors such as the need for more profound discussion of insurance in the economy, and a far greater degree of activation of funds from the economy, and a far greater degree of activation of funds from the economy for infrastructural development. Freedom insurance is at least partly driven by the fiscal need to beat the big reserve of savings in the economy. Recommendations of the Committee were as follows:
o increase in equity suits and GIC up to Rs. 200 crores, half held by the government and the rest sold to the public at large with the appropriate products for their employees.
o private sector is provided to enter the insurance industry with a minimum paid up capital of Rs. 100 crores.
o Foreign insurance allowed to enter the liquid Indian companies remains a joint venture with Indian partners.
o steps are underway to set up a powerful and effective insurance policies in the form of a statutory independent board of Sebi lines.
o A limited number of private companies be allowed in the industry. But no company is allowed in the industry. But no company is allowed to operate in both lines of insurance (life or non-life).
o Tariff Advisory Committee (TAC) is delinked form Gic to function as a separate statuary body under necessary supervision of the insurance regulatory authority.
oAll insurance companies be treated on an equal basis and governed by the provisions of the Insurance Act. No special exemption is given to government companies.
oSetting a strong and effective regulatory body with independent source of funding before allowing private companies in the sector.
competition in the public sector
Public companies now have to face competition with the private insurance sector not only in issuing various kinds of insurance, but also in various aspects in terms of customer service, channels of distribution, effective methods of selling products etc. privatization of the insurance sector has opened the door to innovations in how the company can be in business with.
New age insurance companies are embarking on new ideas and cost effective way of transacting business. The idea is clear to cater for the maximum trade that cost. And slowly over time, the age-old norm dominated by government enterprises to expand by setting up branches seems getting lost. Among the techniques that seem to catching up fast in place to cater to rural and social sector insurance is the hub and spoke arrangement. This together with the participants of NGOs and Self Help Group (SHGs) have done with the most sales in rural areas and social policy sector.
main challenges from commercial banks which have an extensive network of branches. In this regard it is important to mention here that LIC has agreed to Mangalore based Corporations Bank to exploit their infrastructure for the benefit of insurance monolith acquiring a strategic 27 percent stake, Corporation Bank has decided to abandon its plans to promote life insurance undertakings. The bank will act as a corporate agent for LIC in the future and receive remuneration policies sold through its branches. LIC with a branch network of nearly 2,100 offices will allow the Corporation Bank to set up extension centers. ATMs or branches in the forecast. Corporation Bank would then implement an effective Cash Flow Management System for Lic.
IRDA Act, 1999
preamble IRDA Act 1999 reads’ An Act to provide for the establishment of an authority to protect the interests of insurance policies, to control, to promote and ensure orderly growth the insurance industry and the issues related or incidental to it.
Section 14 of IRDA Act, imposes duties, powers and functions of the authorities. The powers and functions of the authority. The powers and functions of the Authority shall include the following.
o Issue to the applicant a certificate of registration, renew, modify withdraw, suspend or discontinue such registration.
o To protect the interests of policyholders in all matters pertaining to the nomination policy, the surrender value in the policy, insurable interest, settlement of insurance claims, other terms and conditions of the contract of insurance.
o Identify the necessary qualifications and practical training for insurance agents and intermediates.
o Identify the protocol for surveyors and loss assessors.
o Promoting efficiency in the implementation of insurance
o promote and manage professional regulators related to the insurance and reinsurance.
o Identify ways that books of accounts will be kept and statement of accounts rendered insurers and insurance brokers.
o Discussion and disputes between insurers and intermediates.
o proportion of the life insurance and general and general business to take care insurers in rural social services, etc.
Section 25 provides that the Insurance Advisory Committee will be established and shall consist of not more than 25 members.Section 26 states that may, after consultation with the social security advisory Committee regulations made under this Act and the rules made there under to deliver this purpose Act.Section 29 seeks amendment of certain provisions of the social security Act, 1938 in the manner as stated in the first amendment. Amendments to the Insurance Act are derived in order to strengthen the IRDA to effectively manage, promote and ensure orderly growth of the industry.
Part 30 & 31seek change LIC Act 1956, GIC Act 1972.
effect the abolition of
Although nationalized insurance companies have done a commendable job in covering the opening of the volume of business of the insurance sector to private players was necessary in connection with the liberalization of the financial system. If traditional infrastructural and semi public goods industries such as banks, airlines, telecommunications, energy, etc. have a significant private sector presence, to keep the monopoly on the provision of insurance was indefensible and the privatization of insurance has been made as previously discussed. its impact has to be seen in the form of creating various opportunities and challenges.
opportunity
1. Privatization Insurance case was out of the monopolistic operation Life Insurance Corporation of India. It can help to achieve wide range of risks in general insurance and life insurance also. It helps to introduce a new range of products.
2. It would also lead to better customer service and help add variety and pricing of insurance products.
3. The entry of a new player would accelerate the spread of both life and general insurance. It will increase the insurance penetration and a measure of density.
4. Entry of private players will ensure the provision of funds that can be utilized for the purpose of infrastructure development.
5. Allowing commercial banks to insurance companies will help to mobilize funds from the regions due to the availability of high bank branches.
6. Most important especially tremendous job opportunities will be created in the insurance sector is the burning problem of the presence of day to day issues.
present circumstances
After the opening up of insurance in the private sector, a number of leading private companies including joint ventures have entered the areas of both life insurance and non-life insurance company. Tata – AIG, Birla Sun Life, HDFC Standard Life Insurance, Reliance General Insurance, Royal Sundaram Alliance Insurance, Bajaj Auto Alliance, IFFCO Tokio General Insurance, INA Vysya Life Insurance, SBI Life Insurance, Dabur CJU Life Insurance and Max New York Life. SBI Life Insurance has launched three products Sanjeev, Sukhjeevan and Young Sanjeev so far it has already sold 320 policies under the program.
Resolution
From the above discussion we can conclude that the entry of private players in the needful work Insurance Business and justified in order to increase the efficiency of operations, achieve greater density and coverage in the country and for more mobilize long-term savings for long-gestation infrastructure prefects. New players should not be treated as rivalries to government companies, but they can complement to attain the growth of the insurance business in India.