In a massive country like India, the insurance sector plays a pivotal role in the stability and protection of the nation. The concept of insurance is rather simple. Insurance is where the risk is undertaken by parties that are capable of bearing those risks (for a premium). The idea behind this is to transfer the risk from the insured (the policyholder) to someone who is more capable of bearing the risk (insurer). This leads to financial and social stability across a country. The insurance sector in India is regulated by the Insurance regulatory and development authority (IRDA)
We will be discussing some of the following salient features and aspects relating to the insurance sector in India:-
There are 3 board sub-sections in the insurance sector. They are life insurance, general insurance, and reinsurance.
Life insurance companies: There are a total of 24 life insurance companies in India.
General insurance companies: A total of 34 general insurance companies are active in India (as of 2021).
Reinsurance companies: General Insurance Corporation Of India (GIC) is the only reinsurance company in India.
The insurance sector in India is regulated by IRDA (having its headquarters in Hyderabad). IRDA came into force in 1999, after the Indian Parliament passed the IRDA act in 1999. It is IRDA’s role to ensure fair competition among the insurance companies and the efficient functioning of the insurance sector in India. It is also the IRDA’s principal goal to ensure that the end customer’s (policyholders) rights are upheld and no injustice is done to them in any capacity.
The insurance sector grew at a compounded annual growth rate (CAGR) of over 12% from 2013-17 and is expected to grow at approximately 5% from 2017-22. India is the 10th largest life insurance market in the world and the 15th largest Non-life insurance market in the world respectively. The life insurance sector in India is valued at $92.1 billion, and the General insurance sector is valued at $24.5 billion.
That being said, penetration of the insurance market is still a measly 5-10%, signifying tremendous growth potential in the future.
The overall Insurance sector in India is expected to grow to $250 billion by the year 2025. India is also forging ahead with a plethora of high-tech insurance products like Unit Linked Insurance Plans (ULIPs) and innovative agricultural insurance products. The penetration of the insurance market in India is also likely to increase due to the innovative intermediary distribution services like Point Of Sales Person (POSP), TPA services, Brokers, insurance repositories, insurance marketing firms, insurance self network platforms(ISNP), and Online web aggregators.
The number of registered intermediaries under IRDA as of 2021 are as follows:-
FDI limit in the insurance sector is up to 74%. The limit was increased from 49% to 74% in the 2021 Union Budget. This move is bound to increase foreign investment in the sector greatly.
IRDA has introduced a plethora of insurance reforms in the country. They include:-
Previously Bank’s could only sell a single insurer’s insurance products. This leads to a lack of selection variety and ended up being detrimental to the end customer. Seeing this, IRDA has introduced the Bancassurance reform where a bank can offer a multitude of insurance products across various insurance companies. This increases the choice for the end customer.
Common Service Centres (CSC) are physical locations set up across the nation for distributing government schemes and products. It was introduced under the ambit of the
Ministry of Electronics and Information Technology and is managed by CSC e-Governance Services India Limited. There are over 1.5 lakh CSCs across the country.
IRDA has pushed for Electronic Insurance. This means insurance policies, related documents, and KYC requirements will be handled electronically and without the need for physical handling.
Companies having paid-up capital of over INR 1 billion are eligible to partake in the insurance sector. There are various further reforms pushed by IRDA to ensure fair competition among insurance companies.
As mentioned above, FDI in the insurance sector has been increased from 49% to 74%. This reform is likely to bring in an influx of foreign capital in the sector and create additional jobs across the sector.
Some customer-centric reforms introduced are:
Thus it can be concluded that the insurance sector will be a leading absorber of skilled labor within the nation in the years to come.
The Government Of India has introduced a plethora of insurance schemes in the nation, intending to provide economic and social stability. Mentioned below are some of the popular government schemes:
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