We all have probably heard the story of the man who was too afraid to ever leave his room out of fear of what might happen to him in the ‘big bad world’ outside his door, just waiting to rip him to shreds. After all, nothing untoward could happen to him, no evil force could set sights on him – not in the security of his own room keeping him eternally hidden away from the outside. What he called solace and safety, others labelled captivity and insanity. Of course, even the most fool-proof of plans doesn’t always work out. In a tragic twist of events, our timid protagonist died suddenly when one night, a heavy gold painting hanging on his bedroom wall happened to topple over onto his head.
This little story, as ironic as it may seem to the casual reader, should in fact be taken as a reminder of the bitter cold truth that as a living, breathing human entity on the Earth, each one of us is at the risk of losing something of value to us. No matter the amount of precautionary measures we take, we are never truly able to avert disaster because let’s face it – if the Mayans could be wrong about the world ending in 2012, then who are we mere humans to claim to be able to predict the future? The obvious thing left to do then, would be to mitigate the extent of the damage caused by such a catastrophic happening and prepare ourselves for facing a disaster. In other words, it always helps to have a financial cushion to fall back on in the face of adversity.
It was this concept of financial security that lead to the evolution of the insurance industry all over the world and the developing economy of India is definitely not one to be left out. The idea of pooling resources of many to provide financial cover for some who face adversity has been talked of in the oldest of Indian scriptures and in the Arthashastra, Dharmashastra and the Manusmrithi. Over the centuries, it has emerged into a modernised, finer and more organised industry as a whole and this industry happens to be responsible for a large part of the country’s economic development and progress. But while India proudly stands today boasting of a booming insurance industry with 24 life insurance companies and 28 non-life players, it took a long time for the country to get to this point.
The Journey to the Here and Now
Under the colonial rule of the Great British Empire, the insurance sector was just beginning to peek out from the confines of ignorance when in 1818 Anita Bhavsar of Kolkata founded the Oriental Life Insurance Company for the almighty conquerors of our land – the Britishers. With the emergence of a few more insurance companies to cater to the westerners in our territory, Indians’ lives were insured but at much higher premium rates than those for the Britishers.
It wasn’t until the post-independence era that the Life Insurance sector was nationalised by the Government with the Life Insurance Corporation (LIC) being set up in India in 1956. The LIC soon managed to absorb 245 Indian and non-Indian insurers in total. It was after the introduction of the New Economic Policy, 1991 that the insurance industry in India was opened to private players once again.
In the early years of its birth, the insurance sector was completely free of the Government control but soon became completely regulated and public. However, after the Liberalisation, Privatisation and Globalisation practices in the country, the industry switched to being partly regulated. Today, the governing body of our country’s insurance industry is the Insurance Regulatory and Development Authority (IRDA) of India which was set up in 1999, the year that private companies entered the industry. It is governed by the IRDA Act, 1999 as well as the Actuaries Act, 2006.
Growth of Market Share of Private Insurance Companies in India
|Private Sector – Life/Non-Life Companies||2004 (in %)||2014 (in %)|
|Life Insurance Companies||4.7||24.6|
|Non-Life Insurance Companies||9.6||45.3|
The SWOT Analysis – Strengths, Weaknesses, Opportunities, Threats
As it is with everything else in the world, the Indian Insurance industry too has its share of positives and negatives. It is an undeniable fact that as one of the fastest developing nations of the world, our rapidly emerging economy reflects great long-term potential and promise. With a vast population of over 1 billion people (and counting!), we are definitely not a country that can be nonchalantly swept off to the side-lines and comfortably ignored. Ours is definitely a democratic force to reckon with. Also, there is a large pool of wealthy Indians which is getting larger by the year, leading to higher investments in insurance. After all, the more the merrier and definitely morerisky. And where there is risk, there is a golden opportunity for insurance companies, waiting to be exploited.
However, with the good, comes the bad and there are a lot of weaknesses and threats that contradict the strengths and opportunities of the industry, bringing the high down by a considerable notch. State-governed insurers dominate the market rampantly and drown the industry into a web of bureaucratic red-tapism that is hard to break out of. Also, in spite of being the largest in the life-insurance sector, the industry lags behind when it comes to the non-life insurance sector with a very minor percentage of the entire Indian population actually insured for their health and lives. The political environment of the country also makes adaptation to change in the industry difficult, leading to stagnation of the insurance sector in the nation. Also, the market for insurance hasn’t been growing as rapidly as expected due to the density of life being low in the country. The rural poor, constituting more than half of the nation’s population still don’t have the monetary means to invest in the luxury of insurance.
Looking on – The Road Ahead
The hope for the future is that the life insurance sector should increase by a growth rate of about 12-15% in the coming half-decade, by 2020. As per the Sectoral Report by the India Brand Equity Foundation on July 2015, the market size of the country’s insurance sector should hopefully jump from the current US$67 billion (approx.) to about US$ 350-400 billion in the next five years with the investment in the pension sector of the country crossing US$ 1 trillion in the coming decade.
One of the major problems of the Insurance industry is that while the population is increasing at an unimaginable rate, the insurable population of the country remains at an all-time low – a fact that should hopefully change soon with the population insured reaching a high of about 75 crore in the next five years. Also, the changing political scenario will make things more interesting and shall definitely bring about a positive change for the sector, as will the improving demographic factors, economic conditions of the Indian population and the growing realisation and admittance of the fact that one doesn’t have any control over the future.
Contributed by Naval Goel, CEO & Founder, PolicyX.com
Similar Blog Posts
Popular Insurance Plans
Popular Insurance Definitions
Naval Goel is the Founder & CEO of PolicyX.com which was established in the year 2013. Naval has an expertise in the insurance sector and has a professional experience of more than 5 years in the industry. Before venturing into the field of entrepreneurship, Naval had worked with top companies like AIG in New York as a part of their corporate team. He is also an Associate Member of the 'Indian Institute of Insurance', Pune.View Complete Profile
A critical aspect of a retirement plan is how and where to invest. The assets you choose to invest will vary depending on several factors, which include your risk tolerance and investment time horizon.
According to a study by the Insured Retirement Institute, only a few women consider becoming financial planners because they deem the job stressful and uninteresting. The time has come to stop relying on someone else for financial security. Financial planning is nothing but determining short and long-term financial goals, and creating a balance to meet these goals.
Swabhimaan Careers is one of HDFC Life’s strategic initiatives to build long-term customer relationships. The overall objective of insurance is to compensate the financial loss caused due to untimely death of a bread winner.
The Vision and the Mission continue to be relevant and set out aspirations for an organization. But the question that an organization needs to ask is how do they get there? Is it possible to define a 'decision architecture' that guides actions of each employee?
For millions of people in India, the concept of life insurance still remains a mystery. Thanks to the new media channels, more and more people are becoming aware of the significance of life insurance. For those, who wish to develop fundamental understanding of the concept of life insurance, here is a quick snapshot.
Consumer is king. With the shifting of focus on the goods and services reaching out to the consumer rather than the other way round, Mobile learning embodies just that, by taking training not just to the doorstep but also to the learner in person. Just as an individual is empowered to carry his office with him at all times, M Learning empowers him to carry his training program with him, shattering the barriers of space and time.
Reinsurance is an insurance that is purchased by an Insurance company from one or more other insurance companies to manage the risk. Reinsurance helps in transfer of risk from one insurance company to another. It is also called “insurance for insurers” or “stop-loss insurance”.Read More