When the insurance industry was taking its form in India, there were absolutely no regulations. This was in the 19th century. In 1956 the Government of India took over the Life Insurance Company. Followed by that in 1972, the government took over the General Insurance Business of the country. The insurance sector has gone through a number of phases by allowing private companies to solicit insurance and also allowing foreign direct investment. India allowed private companies in the insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014, and further increased to 74% in May 2021. The primary regulator for insurance in India is the Insurance Regulatory and Development Authority of India (IRDAI), established in 1999 under the government legislation called the Insurance Regulatory and Development Authority Act, 1999.
Today there are 34 general insurance companies, including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country. This collaboration with the foreign markets has made the Insurance Sector in India only grow tremendously with a high current market share. The insurance sector is colossal and is growing at a fast rate of 15-20%. Various Government Sponsored Socially Oriented Insurance Schemes regularly contribute to uplifting weaker sections of society.
As is explicitly understood, insurance is a method of risk management to protect people and assets from uncertain losses. It pools funds from various insured entities to pay for the losses incurred. However, not all kinds of risks are protected through insurance. For a risk to be ensured, it should meet certain characteristics. The insurance act of 1938 had comprehensive provisions that provided efficient control of insurers’ activities to protect the people’s interests. Insurance provisions were extremely advantageous for the nation’s economic activity. It also created a sense of social security among the people. Needless to say, the insurance industry in India thrived post-independence.
The insurance industry has grown phenomenally since 2000 as the government allowed private sector investment. One of the main reasons for the continued growth of the insurance industry is because the insurance industry in India is not a high capital cost industry, unlike telecommunications or oil. The fact that incomes are rising, lifestyles are constantly changing, and newer trends are emerging in the industry are excellent signs for the sector to strive for better product innovation, efficient claims management, multi-distribution and many other regulatory trends.
The non-life Insurance sector closed the last fiscal with about 11 % growth by earning a total premium of Rs. 220,634.73 crores as against Rs. 198714.72 crores earned during 2020-21. This has seen a major growth post-pandemic. This has led to tough competition with a positive and healthy outcome. There is no doubt that the new insurance companies that will be set up soon will surely experience positive growth and expansion in the Insurance sector. With several regulatory changes in the insurance sector in India, the future looks pretty awesome and promising for the insurance industry.
MD, Shriram General Finance