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FFACTORSACTORSCCONTRIBUTINGONTRIBUTING TOTO
SSLOWLOWGGROWTHROWTH OOFFIINSURANCENSURANCEININIINDIANDIA
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WHAT IS INSURANCE?
Insurance is a form of risk managementprimarily used to hedge
against the riskof a contingent, uncertain loss.
In return insurance premium is requiredto be paid.
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HISTORY OF INSURANCE
Insurance in its modern form firstarrived in India through a
Britishcompany called the Oriental Life.
They insured the lives of Europeans livingin India.
The first company that sold policies to
Indians with fair value was the BombayMutual Life Assurance
(1871).
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INSURANCE DENSITY
India is among the lowest-spendingnations in Asia.
An average Indian spent USD 16.4 oninsurance products in
2003.
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CHALLENGES
Majority of population works under informalsector, hence they do
not necessarily have asource to steady income.
Further if Govt. also wishes to help, there isno provision for
unique identification (as yet)which risks the benefits to be
misused.
Stringent rules have to be liberalized andproper balance should
be maintained betweeninsurance solvency and investment
flexibility.
At present price structure dont reflect andjustify product
risk.
Hence obsolete regulation on price structureneeds to be replaced
by risk-differentiationpricing structure.
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Insurers need to design new products,and make new distribution
channels toreach the untapped Indian masses in ruraland tier-2
towns.
Rapid growth will put pressure on
insurers capital, and stringent rules likeceilings on FDI would
make more difficultfor private players to infuse the money.
Problem with non-life segment is heavy
regulationsInfrastructure, financial, technical and
research on disasters play an importantrole in non-life
insurance, but in India all
the facilities are not up to the mark !
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GENERAL REASONS FOR LOW GROWTH
Lack of awareness among people. Simplestructure required.
Lack of willingness to invest in insuranceproducts like accident
or medi-claimpolicies.
Masses till date do not have the aptitude
for incurring an expense whose benefitwould not be enjoyed by
them. Mindframe is such that after term the moneyis lost. More
interest in ULIP.
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GENERAL REASONSCONTD
Insurance taken to get deduction undersection 80c. They think
premium paymentis waste of money.
Insurance companies makes efforts totell people about life
insurance but notgeneral insurance.
Tax saving instrument. Masses neglectthe fact that it provides
financialsecurity.
Misinformation spread by agents.
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PRE-INDEPENDENCE
Insurance was a totally new concept forthe Indian masses.
During initial days only British peoplewere offered
insurance.
Miseries caused by British.
Social factors like Dowries.
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IMMEDIATE POST INDEPENDENCE
Unfamiliarity with insurance products,practically impossible to
think of suchfuture aspects.
Majority of masses lived below thepoverty line.
Government was forced to prioritize
agriculture sector first followed byindustrial and then service
sector.
Nationalization of LIC
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MODERN FACTORS
Influence of Government in Insurancesector (upto 1999).
Foreign Direct Investment is allowed upto26%.
Other saving and investment productshave attracted more
people.
Insurance companies till date are notallowed to list on equity
market and raisemoney via IPO.
Recent spats like IRDA v/s SEBI.
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FUTURE SCOPE
Expected Regulatory changes will turnaround the game for
insurance industry.
Price competition amongst variouscompanies will encourage the
volumes ofindustry.
Access to international markets.
An estimate shows that non-life insurancein India will grow 2
times in next 5 years.
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WEBLIOGRAPHY
http://en.wikipedia.org/wiki/Insurance,
http://en.wikipedia.org/wiki/Insurance_in_India
http://unpan1.un.org/intradoc/groups/public/docu
ments/apcity/unpan025798.pdf
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BIBLIOGRAPHY
The Economic Times
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MEMBERS
Parvathi Venkitaraman 19
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