Trends in the Indian Insurance Sector

chillibreeze writer — Ishmeet Gujral

Indian economy is one of the fastest growing economies of the world. It is developing at a very fast pace as compared to other global economies. In 2008, India was ranked as the second fastest-growing economy of the world.
The sectoral distribution of the Indian economy can be figured by 62.5% in service sector, 20% in industrial sector and 17.5% in agricultural sector. India's per capita income is $1,030, ranked 139th in the world.

The major service sectors which are considered to be a boon for the Indian economy are the IT sector, the Business Process Outsourcing sector, Insurance Sector, Banking industry and tourism sector.

Among the service sectors, the insurance sector is one of the fastest growing. Looking back, at the time of the British rule in India, the very first insurance company named Oriental Insurance Company was started in 1818; however, it discriminated between the British and the Indian community.

The first Indian insurance company was the Bombay Mutual Life Assurance Society which came into existence in 1870. In the early 20th century, many new insurance companies emerged and thus the Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables and periodical valuations of companies should be certified by an actuary.

A monopoly existed in both Life as well as general insurance business for Life Insurance Corporation of India, (LIC) and General Insurance Corporation, (GIC) with its four subsidiaries, namely Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

Liberalization, privatization and globalization resulted in a vast change and development of the Indian insurance sector, as many new private sector players entered the Insurance market which hampered the monopoly of the Government in the Insurance sector. Currently, India is the world's fifth largest life insurance market and is growing at a rapid pace of 32-34% annually.

There is a huge source of develoment in this sector due to a large base of untapped market because of the country’s second largest population and other economic factors. According to the norms of the IRDA, many schemes are also introduced for the rural sector which focuses only on the development of this sector.

Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population is covered under some insurance schemes.

Privatisation in India has increased due to the Foreign Direct Investments which the foreign sector companies are readily doing in order to form a merger of one foreign and one Indian Insurance company. As per the current norms of the FDI, any foreign collaboration can invest upto 26% of the total share capital and the rest 74% would be of the Indian company.

Even after the existence of 20 private sector companies in the Life Insurance business, LIC leads the chart by its top ranking. Among the private sector players, ICICI Prudential Life Insurance (Joint Venture between ICICI Bank and Prudential PLC) is the largest, followed by Bajaj Allianz Life Insurance Company Limited (Joint Venture between Bajaj Group and Allianz). Among others, Kotak Life Insurance is emerging as a one of the best product providers in the current market.

On the other hand, when we talk about the general insurance sector with the existence of 15 private sector companies, GIC leads with the 1st rank. Some major private players in this field are Royal Sundram Alliance Insurance, IFFCO Tokio General Insurance, ICICI Lombard General Insurance and Cholamandalam General Insurance.

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Chillibreeze's disclaimer: This is a contributed article and was published on Chillibreeze in July, 2010. The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article. The relevance of the facts and figures cited (if any) could change after a period of time.

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—About our writer:

Ishmeet Kaur Gujral is currently pursuing a Bachelors in Business Administration. She writes articles during her free time.

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