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Unit 13: Insurance Industry: India

In order to protect the interests of policyholders, earlier legislation was consolidated and Notes
amended by the Insurance Act 1938 with comprehensive provisions for detailed and effective
control over the activities of insurers.
Earlier life insurance was confined mainly to the cities and better-off segments of society. With
a view to spread life insurance to the rural areas, to have control over all the insurance providers
in India and to bring them under one roof the Government of India decided to nationalize the
life insurance business. Thus in 1956, the President of India passed an ordinance for nationalization,
thereby giving birth to the Life Insurance Corporation of India.
Since 1956, with the nationalization of insurance industry, the state run Life Insurance
Corporation of India (LIC) has had a monopoly in India’s life insurance sector. Over the years,
it has reaped the advantages of monopoly and enjoyed a virtual prerogative in setting premiums.
With more than 6 lakh agents in every nook and corner of the country, it has created a brand
name for itself. It has, to its credit, around $44 billion as its life fund and is a strong player in the
financial sector. Over the years the government felt that the Life Insurance Corporation of India
was losing its grip, and decided it was time to let private players enter the market.

Present Scenario

You must remember that the liberalisation, privatisation and globalisation policies of the nation
along with the revolution in the field of Information Technology and communication have been
advantageous for the insurance sector in India.

Entry of private players and foreign collaborations: It was on the recommendation of the
Malhotra Committee that private players were allowed to enter into the insurance market.
Today there are almost 22 players who have entered the Indian insurance market besides
the giant Life Insurance Corporation of India (LIC).
Another major development that has taken in the field of general insurance is the de-
linking of the 4 subsidiaries of the General Insurance Corporation of India (viz. Oriental
Insurance Company Ltd., New India Assurance Company Ltd., National Insurance
Company Ltd. and United India Insurance Company Ltd.) from the parent company.
Marketing strategies and approaches: The entry of private players and their foreign partners
has given domestic players a tough time, because the opening up of the sector has not
brought in only foreign players, but also professional techniques and technologies. The
present scene in India is such that everyone is trying to put in the best efforts. One can see
strategies being more for survival than growth. But the most important gift of privatisation
is the introduction of customer-oriented services. Utmost care is being taken to maximize
customer satisfaction.

Self Assessment

Fill in the blanks:
5. The Government felt the need to ……………………………………. life insurance.
6. The President of India passed an ………………………………… for nationalisation, thereby
giving birth to the Life Insurance Corporation of India.
7. The most important gift of privatisation is the introduction of ………………………………
services.
8. The entry of private players and their foreign partners has given ……………………………..
players a tough time.

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