Introduction
The journey of insurance liberalization in India is now over the age of seven years. The first major milestone on this path has changed over the Insurance Regulatory and Development Authority Act, 1999. This paves the Insurance Act 1983 as amended, LIC and GIC acts the way for the entry of private players and possibly the privatization of previously state monopolies LIC and GIC. The opening up of insurance in the private sector, including foreignParticipation is shown in various opportunities and challenges.
Concept of Insurance
In our daily life, if it is unsafe to participate in risk. The instinct of security against such risk is a key driver in determining human behavior. As a continuation of this pursuit of security, the concept of insurance has been born. The urge to offer, insurance or protection against loss of life and property, people need to have fostereddoing some kind of victim voluntarily in order to achieve security through collective cooperation mode. In this sense, the history of insurance is probably as old as the history of mankind.
Life insurance in particular, protects against the financial risk of premature death of their income earning member. Life in today's world also offers protection against other life risks, as they (ie the longevity risk arm, the source of income) and risk of disabilityand disease (health insurance). The products ensure durability are pensions and annuities (insurance against old age). Non-life insurance provides protection against accidents, property damage, theft and other liabilities. Non-life insurance contracts are usually shorter than the duration of life compared to insurance contracts. The pooling of risk coverage and saving life is strange. Life Insurance offers both protection and investment.
Insurance is a blessing for thebusiness concerns. Insurance provides short range and long-relief. The short-term relief is to protect children of the insured from the loss of property and life by a distribution of damage to large numbers of people through the medium of professional risk carriers, such as insurers. It enables a business man, an unanticipated loss of face, and therefore he need not worry about the possible loss. The Long-Range object is the economic and industrial development of the country with an investment oflarge funds available with the insurers in the organized industry and commerce.
General Insurance
Before the nationalization of general insurance industry in 1973, the GIC Act was passed in Parliament in 1971, but it came into force in 1973. There were 107 General insurance companies including branches of foreign companies, has merged into the country on nationalization of these companies and in the following four subsidiaries of GIC, such as National Insurance groupsCo.Ltd., Calcutta, The New India Assurance Co. Ltd., Mumbai, The Oriental Insurance Co. Ltd., New Delhi and United India Insurance Co. Ltd., Chennai and now delinked.
General insurance business in India is largely in the fire, marine and other GIC split apart from direct handling and aviation reinsurance business managed the Comprehensive Crop Insurance Scheme, accident insurance, social security, etc. The GIC and its subsidiaries in accordance with the objective ofnationalization, the reporting of insurance, far and wide, and the insurance company shall endeavor to protect the weaker section of society to design, new blankets and other non-popularize traditional business.
The liberalization of the insurance --
The had no comprehensive regulation of the insurance business in India, has been associated with the adoption of the Insurance Act, 1983. He has tried to create a strong, effective supervisory and regulatory authority for the controllerof insurance in connection with direct powers to advice, analysis, registration and liquidation of insurance companies, etc. However, due to the nationalization of the insurance industry, most of governmental functions from the controller over, and in the insurance, insurers are entitled. The Government of India in 1993 led a high-level expert group set up powered by RNMalhotra Committee, former Governor of the Reserve Bank of India to examine the structure of the insurance industry and recommend changes toconsider it more efficient and competitive in terms of structural changes in other parts of the financial system in the country.
Malhotra Committee recommendations
The committee submitted its report in January 1994 recommended that private insurers may coexist, as well as state-owned companies such as LIC and GIC businesses. This recommendation has been to several factors such as the need for better insurance protection requested deeper into the economy, and a much larger scaleMobilizing resources from the economy and a much greater degree of mobilization of resources from the economy to the development of infrastructure. The liberalization of the insurance industry is due at least partly by fiscal need to identify the large reserve of savings in the economy. Committee's recommendations are as follows:
• Raising the capital base of LIC and GIC up to Rs 200 crores, half received Book of the government and the remainder to the general public with appropriate salesEmployees.
• Private sector grants, giving the insurance industry with a minimum capital of Rs 100 crores.
• Foreign insurance companies may be of floating an Indian company, preferably a joint venture with Indian partners.
• The steps are initiated, a strong and effective insurance supervision in the form of a statutory autonomous board along the lines of SEBI.
• Limited number of private companies are allowed in the sector. But no company is allowedin this sector. But no company is authorized to operate in two lines of insurance (life and non-) life.
• Tariff Advisory Committee (TAC) has delinked the form of GIC as an autonomous body under the supervision of sculptures by the necessary insurance regulatory function.
• All insurance companies are treated equally and shall be governed by the provisions of the insurance. No special dispensation is granted by the Government of companies.
• Establish a strong and effective regulator, withindependent source of funding for prior authorization of private sector companies.
Competitive government sector:
Government enterprises are now available for competition with private sector insurance companies not only in issuing different range of insurance products, but also in various aspects related to customer service, sales channels, effective techniques for selling products, etc. Privatization of the insurance sector opened the doors to Innovations in the type of businesscan be made.
New age insurance in new approaches and cost-effective way of doing business. The idea is clear, to the maximum activity, thus ensuring the costs. And slowly, over time, the age-old standard spread by state-owned enterprises to expand through the establishment of branches seems to be lost. Among the techniques that seem to bring to justice quickly as an alternative to the rural and social insurance, hub and spoke arrangement. This, together withparticipants from NGOs and Self Help Group (SHG) have with most of the marketing of rural and social sector measures have been undertaken.
The main challenge is from the commercial banks, the vast network of branches. In this context it is important to note that LIC has an agreement with Mangalore-based bank company to have its infrastructure for the mutual benefit of the insurance monolith with the acquisition of a strategic equity set to use 27 percent decided Corporation Bankto abandon its plans to promote a life insurance company. The Bank will act as a corporate agent for LIC in the future and selling commission on the policy through their branches. LIC with its branch network of almost 2,100 branches allowing Corporation Bank to set up extension centers. ATMs or branch offices in their premises. Corporation Bank would in turn an effective cash flow management system for LIC.
IRDA Act, 1999
Preamble to the IRDA Act 1999 states: "An Act to providethe establishment of an authority to protect the interests of holders of insurance policies to regulate, promote and orderly development of the insurance industry and for matters related or guarantee with it.
§ 14 of IRDA Act defines the functions, powers and functions of the Authority. The powers and functions of the Authority. The powers and functions of the Authority shall include the following.
• issue the applicant a certificate of registrationmodify, renew, suspend, revoke or cancel such registration.
• To protect the interests of policyholders in all matters of appointment of the policy, surrender value f policy, insurable interest, settlement of insurance claims, other terms and conditions of the contract of insurance.
• Specifying requisite qualifications and practical training for insurance agents and intermediates.
• Specifying the code of conduct for surveyors and loss assessors.
• increase efficiency inthe conduct of insurance business
• promotion and regulation of professional regulators with the insurance and reinsurance business connected.
• Specify the way, is in the books of accounts and billing of insurers and insurance brokers.
• settlement of disputes between insurers and intermediates.
• Specify the percentage of life insurance and general and general business development will be carried out by the insurers,in rural or social sector, etc.
§ 25 provides that insurance companies are formed Advisory Committee and is composed of not more than 25 members.Section 26 before seen that there is authority may, in consultation with the Insurance Advisory Committee with the regulations adopted pursuant to this Act and the rules under which there would have to end the implementation of this Act.Section 29 seeks amendment of some provisions of the Insurance Act 1938 in the manner as specified in the first schedule. The amendments to the InsuranceLaw to authorize damages to IRDA to regulate effectively, promote and secure, orderly development of the insurance industry.
Act § 30 & change 31seek to LIC Act of 1956 and GIC 1972nd
Effects of liberalization
While state-owned insurance companies a commendable job in increasing volume of business opening up the insurance sector to private players have done, was a necessity in the context of the liberalization of the financial sector. If traditional infrastructure andquasi-public goods sectors such as banking, airlines, telecommunications, electricity, etc., are significant private sector presence, continued state monopoly in the insurance industry was unsustainable and, therefore, the privatization of insurance has been, as had done previously. Its effect has to be considered in terms of creating various opportunities and challenges.
Opportunities
1. Privatization, if the insurance monopoly Business of Life Insurance Corporation of India was removed. It cancontribute to the wide range of risks in general insurance and in life insurance. It helps to introduce new range of products.
2. It would also result in improved customer service and help to increase the variety and the price of insurance products.
3. The entry of new players would accelerate the spread of life and general insurance conditions. It will increase the insurance penetration and density measurement.
4. Entry of private players will ensure the provision of resources that canused for the purposes of developing the infrastructure.
5. Taking into account the commercial banks in the insurance business will help to mobilize resources from the rural areas due to the availability of large branches of banks.
6. Most important, not least enormous employment opportunities in the insurance field to be created, which is a burning issue of the present day is today problems.
Current Scenario
After the opening of the insurance in the private sector, variousleading private companies, including joint ventures have entered the field of life insurance and non-life business. Tata - AIG, Birla Sun Life, HDFC Standard Life Insurance, Reliance General Insurance, Royal Sundaram Alliance Insurance, Bajaj Auto Alliance, IFFCO Tokio General Insurance, INA Vysya Life Insurance, SBI Life Insurance, Dabur CJU Life Insurance and Max New York Life. SBI Life Insurance has launched three products Sanjeevan, Sukhjeevan and Young Sanjeevan so far, and ithas already sold 320 policies in the context of his plan.
Conclusion
From the above discussion one can conclude that the entry of private players in the insurance business, justified and necessary to increase the effectiveness of the measures, greater density and coverage in the country and for a greater mobilization of long-term savings for long gestation infrastructure Prefect. New players should not be treated as rivalries to government companies, but they can complementAchieve the objective of growth of insurance business in India.
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