The insurance industry has seen tremendous growth in India in the last few years with the evolution of advanced products and services. It has led to tough competition with a positive and healthy outcome. Insurance sector in India plays a dynamic role in the empowerment of the economy. And, like for any country and its economic progress, having a well-developed insurance sector that is flourishing is a boon also for India. Because it provides some long-terms funds to bring improvement in the country’s infrastructure and strengthen the risk-taking ability of the country. It substantially raises the saving opportunities among people, protect their future and support the insurance sector form a massive pool of funds.
Historical Journey of Insurance Industry
The journey of the insurance industry in India had begun in the early 19th century. The first insurance company of India was Oriental Life Insurance Company; it was incorporated in 1818 by Europeans in Kolkata to serve their community. In 1870, the first Indian insurance company, Bombay Mutual Assurance Society was established. And, in 1850, Triton Insurance Company was founded to offer general insurance solutions.
Slowly but steadily, the sector started getting counted into the important industry making a remarkable contribution to the Indian economy. In the early 20th century, many new companies started growing in the country. In order to regulate these companies, the Life Insurance Companies Act was passed in 1912. During this time phase, the Indian insurance sector was passing through its growing phase through three stages, Pre-Nationalisation, nationalization, and Privatisation. Nationalization of the industry happened at the time when the Life Insurance Corporation Act- 1956 was passed.
Public Sector insurance companies were making a loss, and privatization was looking the only solution. Since the insurance market was opened for private companies in 2000, the industry changed instantly. Privatization brought efficiency in the business. Many new companies entered the market with fascinating offerings like HDFC Life, Bajaj Allianz Life Insurance, Reliance Life ICICI Prudential, Kotak Life Insurance and many more. However, the sector is still under-penetrated, the scenario has completely transformed after the emergence of private players. Now, as the Insurance Bill that approves FDI limit in the insurance sector up to 49%, got approval from Parliament, huge growth is expected to see in the industry.
Contemporary Insurance Market of India
When the Insurance Regulatory and Development Authority of India or IRDAI was founded in 2000, it opens the insurance market to private enterprise and allows Indian companies to partner with foreign companies. With this establishment, insurance sector went through a great reformation, and insurance services became available at a very reasonable price for people. Strong economic factors and the government pushing the right buttons with the implementation of technological innovations have propelled the Indian industry on a glorious stage. And, the Life insurance industry has created significant contributions in putting the country on this victorious trajectory.
Presently, the Indian insurance industry has a total of 57 companies among which 24 are working in life insurance, and the rest are working in non-life insurances. Here, LIC is the only public sector company in the life insurance business sector. The non-life insurance companies include Apollo Munich Health Insurance Company, Star Health, Cigna TTK Health Insurance Company and much more work in personal accident, health, travel, etc.
Besides, there are two specialized insurer- Agriculture Insurance Company Ltd, it caters to crop insurance and Export Credit Guarantee of India, it caters to the credit insurance. The country is on the fifteenth position among the largest insurance market worldwide in terms of premium volume and has the potential to grow shortly.
Future of Insurance Sector in India
Although LIC is dominating the insurance sector in India, the emergence of new private companies in the sector will experience a vibrant expansion and progress of life as well as non-life sectors. The Indian insurance market is expected to have a huge business opportunities waiting to be harnessed. As event today, India insurance market accounts for less than 1.5% of the total insurance premium in the entire world and about 2% of total life insurance premiums of world in spite of being the second most famous nation. The future looks promising for the life insurance with multifarious changes in the regulatory framework that will lead to remarkable changes it the way the industry does its business and get connect with its customers.
Data says that in the next three to five years, the Indian insurance industry will grow by 12%-15% approx, and it is expected to reach US$ 280 billion by the end of 2020. Demographic factors like growth of the middle class, young insurable, population, and increasing awareness of the need for protection planning will the main foundation for the progress of the industry.