The Future of Insurance Sector in IndiaPosted on: September 13, 2020, by : Rakesh Sashmal
Insurance Sector in India – The Insurance industry of India has witnessed major growth in the past few decades. With the introduction of new products and plans, it has not only helped consumers by providing financial protection but also contributed to the nation’s economy. A well-developed insurance sector acts as the backbone of a nation as it supports the citizens even in unforeseen events.
According to studies, the overall insurance penetration in India has reached to 3.69% in 2017 from 2.71% in 2011. However, the overall insurance reach in India still remains low. Moreover, the insurance sector in India is expected to reach US$ 280 billion by the year 2020.
The insurance sector in India is majorly divided into two categories:
- Life Insurance: Life insurance or personal insurance is a contract between an insurance company and a policyholder, in which the insurance company provides a lump-sum amount, known as a death benefit to the beneficiaries stated in the policy after the death of the policyholder.
- General Insurance: A general insurance or a non-life insurance policy is further divided into subcategories –
- Health Insurance
- Motor Insurance
- Travel and accident Insurance
- Fire Insurance
- Home or Property Insurance
Benefits of Insurance in India?
There might be certain risks involved as the market is volatile and dynamic. However, having an insurance policy is beneficial in ways more than one.
- Insurance controls your expenditures and facilitates savings. Moreover, holding an insurance policy would provide you with peace of mind. It ensures financial stability within the family as well as your business.
- It provides safety and security against all unforeseen circumstances like accidents, health issues or deaths, both in your personal life as well as in your business.
- Any insurance policy promotes the economic growth of the policyholder and gives a boost to his or her business or trade, as it encourages and promotes savings so that you are left with considerable sums in your post-retirement period.
- You will receive adequate support for your medical expenses without burning a huge hole in your pocket. It, therefore, ensures a sound and healthy lifestyle of the policyholder as well as his or her dependents.
- Insurance is a source of assembling large funds by the way of premium. These funds can be utilised for promoting the industrial growth of India, thus ensuring its economic growth. These large funds further accelerate the employment rates and opportunities, thus becoming a great source of capital fund accumulation of the country.
Insurance is a Well-Regulated Industry in India
The insurance industry in India is governed and regulated by the Insurance Regulatory and Development Authority of India (IRDAI).
- What is IRDAI?
The IRDAI or the Insurance Regulatory and Development Authority of India is an autonomous and statutory body that regulates and promotes the insurance industry in India. It is designed to safeguard and protect the interest of the policyholder and to check that their rights are not violated.
- What IRDAI Does?
The role of IRDAI is to monitor the entire insurance sector of India thoroughly. It also acts as a custodian of the rights of an insurance policyholder. The IRDAI thus, makes sure that all the insurance companies are abiding by the rules so as to safeguard the rights of the citizens of India.
- Functions of IRDAI
As defined in Section 14 of the IRDAI Act, 1999, the various functions of the IRDAI are listed below –
- Issuing, modifying, renewing, withdrawing, cancelling or suspending registration of insurance companies.
- Safeguarding the rights and interests of policyholders.
- Specifying the codes of conduct for loss assessors and surveyors.
- Specifying the codes of conduct, qualifications and training for intermediaries and agents.
- Promoting and ensuring efficiency in the work procedures of insurance companies.
- Levying necessary fees and other charges, or changing the fee structure from time to time.
- Investigating and scrutinising insurance companies, agents, intermediaries and other associated organisations.
- Specifying the form and manner of how the insurance companies should keep the books of accounts and maintain the account statements.
- Overseeing the Tariff Advisory Committee.
- Regulating rates, terms and conditions and other advantages which are not covered by the Tariff Advisory Committee, even though they might be provided by insurance companies.
- Regulating the investment funds of insurance companies.
The Future of the Insurance Sector in India
Having a look at the current market scenario, we can find that LIC has taken over a major part in the overall Insurance Industry in India. However, given the rate of growth in the other Non-life insurance sectors, it is estimated that they are sure to compete with Life insurance companies in the years to come. New insurance companies rising up in the market will definitely experience a vibrant growth and expansion both in the Life as well as General insurance sectors. With rising incomes and changing lifestyles, some trends are going to emerge in the insurance industry of the county such as product innovation, better claims management, multi-distribution and other regulatory trends in the Indian market.
The Indian Government has also come up with efforts to provide insurance for individuals below the poverty line through various campaigns like –
- Pradhan Mantri Suraksha Bima Yojana (PMSBY)
- Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
- Rashtriya Swasthya Bima Yojana (RSBY)
The introduction of schemes is promising for the country’s citizens as it aims at helping the lower and lower-middle income divisions of the country as they come with relatively lower insurance premiums. This is also about to give the necessary boost to the overall economic stature of India.
For further reading:
IRDAI Allows Standalone Own Damage Motor Insurance Policy
Zero Depreciation Add-on In Car Insurance