An overview on Insurance

Introduction

An Insurance Policy of any kind promises that it will monetarily compensate the insured or the nominee if any unfortunate event happens in the future. This surety comes at a cost, i.e., Insurance premiums paid to the insurer. This is how Insurance Policy operates.

History of Insurance

The existence of Insurance gets traced to Manusmrithi, Arthsastra, etc. They talk about risk-sharing by way of pooling resources for unforeseen scenarios. If we look westwards, the Greeks and Romans also established guilds called benevolent societies that paid for people’s funeral expenses and took care of the bereaved family. These factors seem to have sown the seeds for the modern-day Insurance industry, wherein the provider guarantees a sum for any emergency through an Insurance Policy.

Timeline of the Insurance industry in India

Looking at the evolution of the Insurance industry in India, the following years stand out for the stated reasons:

1818: Life Insurance formally made its entry in the Indian subcontinent. The Oriental Life Insurance company was established in Calcutta.

1912: The Indian Life Insurance Companies Act was passed as the first statutory measure to regulate the Life Insurance business formally.

1928: The Indian Insurance Companies Act enabled the government to collect statistical data about the Life and Non-Life Insurance Policy transacted in India.

1938: Intending to protect the interests of the insured population, the earlier legislation got consolidated and amended by way of the Insurance Act, 1938, with comprehensive provisions for effective control over the activities of the insurers.

1956: Through an ordinance, the Life Insurance sector got nationalised, and Life Insurance Corporation or LIC was launched.

1994: The Malhotra Committee set up in 1993 gave its report recommending the government to open the Insurance sector to private players.

1999: The Insurance Regulatory and Development Authority (IRDA) was formed as an autonomous body to regulate and develop the Insurance market in India.

At Present: The Insurance industry has numerous companies to its name, out of which 24 focus on the Life Insurance business, while the rest are Non-Life insurers.

Future of Insurance Industry

The robust Insurance industry is essential for the growth of any economy as it solidifies the risk-taking abilities of the population. The government understood the importance of this sector and precisely why, based on the Malhotra Committee report, it opened the Insurance sector to private players for its growth and development.

Under the Non-Life Insurance sector, private Insurance companies have a market share of around 54.68%, while Life Insurance holds approximately 33.74% share. Some of the other factors that might boost the Insurance industry in the coming years are:

Strategic Alliances: In January 2020, HDFC Limited acquired a 51% stake in Apollo Munich Health Insurance Company. In November 2020, HDFC Ergo and HDFC ERGO Health merged to form HDFC ERGO General Insurance Company Limited. This led to a higher Insurance network for the masses – including one of the largest cashless networks across 10,000+ hospitals.

Insurance Government Schemes

Several flagship programmes have been launched by the government for the development of the Insurance sector, such as –

• Pradhan Mantri Jan Suraksha Bima Yojna: Aims to offer affordable Insurance for the population below the poverty line in rural India
• Pradhan Mantri Jeevan Jyoti Bima Yojna: Aims to provide Life Insurance to those engaged in the unorganised work sector
• Foreign Direct Investment: Through the Insurance Amendment Act of 2021, the Foreign Direct investment cap in the Insurance sector in India increased from 49% to 74%. This act also does away with contentious foreign ownership restrictions that were introduced in 2015. They acted as a barrier in getting the desired foreign investment flow into India.

Additional Read: Is COVID-19 covered under Health Insurance in India?

Conclusion

From the old risk-sharing methods of ancient times, the Insurance market in India has come a long way. Buying Insurance online is a matter of only a few clicks. Buying Insurance Policy is no longer vanilla contracts but highly customisable products you can access anytime, anywhere.