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Indian Insurance

Indian Insurance

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Published by Madhup Desai

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Published by: Madhup Desai on Apr 08, 2011
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Indian Insurance
Introduction:
 The Insurance sector in India governed by Insurance Act, 1938,the Life Insurance Corporation Act, 1956 and General InsuranceBusiness (Nationalisation) Act, 1972, Insurance Regulatory andDevelopment Authority (IRDA) Act, 1999 and other related Acts.With such a large population and the untapped market area of this population Insurance happens to be a very big opportunityin India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it addsabout 7 per cent to the country’s GDP .In spite of all this growththe statistics of the penetration of the insurance in the country isvery poor. Nearly 80% of Indian populations are without Lifeinsurance cover and the Health insurance. This is an indicatorthat growth potential for the insurance sector is immense in India.It was due to this immense growth that the regulations wereintroduced in the insurance sector and in continuation“Malhotra Committee”
 
was constituted by the government in1993 to examine the various aspects of the industry. The keyelement of the reform process was Participation of overseasinsurance companies with 26% capital. Creating a more efficient
 
and 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 seachanges .The competition LIC started facing from thesecompanies were threatening to the existence of LIC .since theliberalization of the industry the insurance industry has neverlooked back and today stand as the one of the most competitiveand exploring industry in India. The entry of the private playersand the increased use of the new distribution are in the limelighttoday. The use of new distribution techniques and the IT tools hasincreased the scope of the industry in the longer run.
Meaning of Insurance:
Insurance is a contract between two parties whereby oneparty called insurer undertakes in exchange for a fixed sum calledpremium, to pay the other party called insured a fixed amount of money on the happening of certain event. Insurance indemnifiesassets and income. Every asset (living and non-living) has a valueand it generates income to its owner. The income has beencreated through the expenditure of effort, time and money.Every asset has expected lifetime during which it maydepreciate and at the end of life period it may not be useful, tillthen it is expected to function. Sometimes it may cease to existor may not be able to function partially or fully before theexpected life period due to accidental occurrences like burglary,
 
collisions, earthquakes, fire, flood, theft, etc. These types of possible occurrences are “risks”Future is uncertain; nobody knows what is going to happen? Itmay or may not? Insurance is the concept of risk management –the need to manage uncertainty on account of above stated risks.Insurance is a way of financing these risks either fully orpartially. Insurance industry has both economic and socialpurpose and relevance Insurance business in India can be broadlydivided into two categories such as Life Insurance and GeneralInsurance of Non-life insurance.
History of Insurance in India:
Insurance has a long history in India. Life Insurance in itscurrent form was introduced in 1818 when Oriental Life InsuranceCompany began its operations in India. General Insurance washowever a comparatively late entrant in 1850 when TritonInsurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras:a) Pre Nationalisation,b) Nationalisation and,c) Post Nationalisation. 

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