Important milestones in the Indian life insurance business
1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.
1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.
1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.
With such a large population and the untapped market area of this population, insurance happens to be a very big opportunity in India.
Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country’s GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India.
A positive element for India is the direction of saving and investment. Economic growth comes from higher saving rate leading to higher investment (capital formation) leading to economic growth. The causality of higher saving leading to higher GDP cannot be theoretically settled but in case of India, however, preliminary analysis have shown that indeed higher saving leads to higher economic growth.
Government’s policy of insuring the uninsured has gradually pushed insurance penetration in the country and proliferation of insurance schemes.
The Government of India has taken number of initiatives to boost the insurance industry
The future looks promising for the life insurance industry with several changes in regulatory framework which will lead to further change in the way the industry conducts its business and engages with its customers
Demographic factors such as growing middle class, young insurable population and growing awareness of the need for protection and retirement planning will support the growth of Indian life insurance.
In addition, increased longevity and aging population will also spur growth in health and pension segments.