INTRODUCTION: In India, the concept of insurance was never given a serious thought, as compared to other countries. Life insurance premium to Gross Domestic Product (GDP) ratio is a mere 1.4% as compared to a healthier rate of 8% amongst other developing countries. The reason being lack of awareness and opportunities combined with poor state of services provided.
Presently in India, the insurance sector is nationalized; Life Insurance Corporation of India (LIC) and General Insurance Company (GIC) render services along with its 4 subsidiaries. While LIC provides life insurance, GIC is concerned with non life insurance like – motor, marine, fire, health and personal accident insurance.
LIC has been one of the pioneering organizations in India, which ushered in the use of information technology in their business on a very large scale to deliver more value and satisfaction to the policyholders. LIC has fully computerized most of its branches all over India. Metropolitan Area Network (MAN) has enabled policyholders to pay premiums or to get their status report, surrender value quotation and loan quotation online. The Zonal Offices and MAN centers are connected through a Wide Area Network (WAN). Interactive Voice Response Systems have been made functional in a number of centers all over the country.
The insurance industry in our country is on the threshold of a new era of rapid expansion. A more competitive environment is expected to emerge with new private participants being allowed to enter the insurance industry. The need for private sector participation in this sector is justified on the basis of enhancing the efficiency of operations, achieving a greater density and penetration of life insurance in the country and for a greater mobilization of long-term savings for long gestation infrastructure projects. In the wake of emerging competition, LIC, with its more than four decades of experience and wide reach, is equipped to face the challenges emanating from the entry of new players. Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, Insurance Regulatory & Development Authority Act, Composition of Authority under IRDA Act, 1999
The origin of insurance is very old .The time when we were not even born; man has sought some sort of protection from the unpredictable calamities of the nature. The basic urge in man to secure himself against any form of risk and uncertainty led to the origin of insurance.
The insurance came to India from UK; with the establishment of the Oriental Life insurance Corporation in 1818.The Indian life insurance company act 1912 was the first statutory body that started to regulate the life insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident firms were been established in India. Then the central government took over these companies and as a result the LIC was formed. Since then LIC has worked towards spreading life insurance and building a wide network across the length and the breath of the country. After the liberalization the entrance of foreign players has added to the competition in the market.
INSURANCE SECTOR IN INDIA
The insurance sector in India has witnessed almost a 360-degree turn over a period of almost two centuries. It has come a full circle from being an open competitive market to nationalization and back to a liberalized market again.
DEVELOPMENT OF INSURANCE IN INDIA
The business of life insurance in India started in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. Despite all these the insurance market is currently underdeveloped in India.
This is mainly because of the following reasons.
- The large-scale of operations, public sector bureaucracies and cumbersome procedures.
- The highest paid employees of the nationalized insurance companies are characterized by abysmal productivity, utter ignorance of the basic principles of the insurance business, endemic corruption, gross indiscipline and sheer laziness.
- Dominating the inevitably weak management of the nationalized insurance companies, the militant and strongly unionized employees of the nationalized monopoly insurance companies have transformed Indian insurance from volume-driven into class-based business.