Page 229 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes Before market liberalisation, LIC sold mostly savings with premiums being tax-deductible in
the hands of the consumers. Protection business was a relatively small proportion of its total
business and riders were not popular. Not surprisingly, the new companies have introduced a
wider range of products along with more need-based selling techniques. Some companies are
selling protection plans in abundance. Most companies are offering a choice of riders, covering
benefits such as accidental death, critical illness, waiver of premium, total and permanent
disability, and guaranteed insurability. Several of the new players have already launched unit-
linked products. For instance, Birla Sunlife’s portfolio has unit-linked products which incorporate
certain guarantees.
Before liberalization, distribution was entirely via agencies. The focus of many of the entrants
has been to implement multi-channel strategies, including a significant bancassurance element.
An interesting development has been the proactive response of LIC to its competitors. The
private players are bringing international experience, new technology, new channels of
distribution and new products. The ground rules in the insurance business are being redefined.
The existing public sector players are gearing up with matching strategies so as to face the
competition. The majority of insurance companies today are under tariff. This means that
insurance companies cannot price the product to suit the customer or customer group. The way
to serve the customer is to segment the market and offer the correct product at the correct price
to that market segment.
Undoubtedly, the biggest beneficiaries of the liberalization of the insurance sector will be the
Indian consumers. While there may not be any significant benefit in terms of the cost of premiums,
they would surely benefit in terms of the number and variety of products and service standards.
Consumers now have a wider choice of insurance schemes. However, it must be noted that at
present Indians are the most deprived customers in the world. Out of about 150 general insurance
schemes on the global level, only 10 per cent of them are offered by the four subsidiaries of the
GIC. Through privatization, consumers will get a wide range of insurance products. Furthermore,
the claims settlement will be customer-friendly.

Self Assessment

Fill in the blanks:

1. It is the ................................... government in power today which has declared its intention
of opening up insurance to the private sector.
2. Before market liberalization, LIC sold mostly savings with premiums being
……………………. in the hands of the consumers.
3. The majority of insurance companies today are under …………………….
4. The biggest beneficiaries of the liberalization of the insurance sector will be the
…………………………….. consumers.

13.2 Current Scenario of Insurance Industry in India

You will find it interesting to note that life insurance in its current form came to India from the
United Kingdom with the establishment of the Oriental Life Insurance Company in 1818.
Thereafter Bombay Life Assurance Company was formed in 1823, the Madras Equitable Life
Insurance Society in 1829 and the Oriental Life Assurance Company in 1874.
The Government felt the need to regularize life insurance and for the first time an Act pertaining
to insurance was passed viz. the Indian Life Assurance Companies Act 1923; later, in 1928 the
Indian Insurance Companies Act was enacted by the government to collect statistical data on life
and non-life business in India.

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