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Introduction Lic

Introduction Lic

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Published by yogeshvermamba

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Published by: yogeshvermamba on Mar 29, 2010
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05/23/2013

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INTRODUCTION1.1 LIFE INSURANCE IN INDIA
With such a large population and the untapped market area of this populationInsurance happens to be a very big opportunity in India. Today it stands as a business growing atthe rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent tothe country¶s GDP .In spite of all this growth the statistics of the penetration of he insurance inthe country is very poor. Nearly 80% of Indian populations are without Life insurance cover andthe Health insurance. This is an indicator that growth potential for the insurance sector isimmense in India. It was due to this immense growth that the regulations were introduced in theinsurance sector and in continuation
³
Malhotra Committee
´
was constituted by the governmentin 1993 to examine the various aspects of the industry. The key element of the reform processwas Participation of overseas insurance companies with 26% capital. Creating a more efficientand competitive financial system suitable for the requirements of the economy was the main idea behind this reform. Since then the insurance industry has gone through many sea changes .Thecompetition LIC started facing from these companies were threatening to the existence of LIC.Since the liberalization of the industry the insurance industry has never looked back and todaystand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of newdistribution techniques and the IT tools has increased the scope of the industry in the longer run.
 1.2 A BRIEF HISTORY
The origin of insurance is very old .The time when we were not even born; manhas sought some sort of protection from the unpredictable calamities of the nature. The basicurge in man to secure himself against any form of risk and uncertainty led to the origin of insurance. The insurance came to India from UK; with the establishment of the Oriental Lifeinsurance Corporation in 1818.The Indian life insurance company act 1912 was the first statutory body that started to regulate the
 
 life insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident firmswere been established in India. Then the central government took over these companies and as a result theLIC was formed. Since then LIC has worked towards spreading life insurance and building a widenetwork across the length and the breath of the country. After the liberalization the entrance of foreign players has added to the competition in the market. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance companyestablished in the year 1850 in Calcutta by the British. In 1957 General Insurance Council, a wing of theInsurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. In 1972 The General Insurance Business (Nationalization) Act, 1972 nationalized the generalinsurance business in India with effect from 1st January 1973. It was after this that 107 insurersamalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New IndiaAssurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance CompanyLtd. GIC incorporated as a company.
1.3 INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor wasformed to evaluate the Indian insurance industry and give its recommendations. The committee came upwith the following major provisions
y
 
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter theindustry.
y
 
  
Foreign companies may be allowed to enter the industry in collaboration with the domesticcompanies.
y
 
Only one State Level Life Insurance Company should be allowed to operate in each state It wasafter this committee came into affect the regulatory body for insurance sector was formed withthe name of IRDA.
IRDA:
The IRDA since its incorporation as a statutory body has been framing regulationsand registering the private sector insurance companies. IRDA being an independent statutory body has put a framework of globally compatible regulations.
 
1.4 IMPACT OF LIBERALIZATION
The introduction of private players in the industry has added to the colors in the dull industry. Theinitiatives taken by the private players are very competitive and have given immense competition to theon time monopoly of the market LIC. Since the advent of the private players in the market the industryhas seen new and innovative steps taken by the players in this sector. The new players have improved theservice quality of the insurance. As a result LIC down the years have seen the declining phase in itscarrer.The market share was distributed among the private players. Though LIC still holds the 75% of theinsurance sector but the upcoming natures of these private players are enough to give more competition toLIC in the near future. LIC market share has decreased from 95% (2004-05) to 81 %( 2009-10).Thefollowing companies has the rest of the market share of the insurance industry.
 

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