Unit 5 Insurance Organization video lecture
1. Brief History of Insurance in India
- Ancient Period:
Insurance in India has roots in ancient practices of pooling resources to cover risks such as crop failure and trade losses.
Example: Merchants in the Vedic period shared risks of trade journeys by dividing goods among multiple ships. - Colonial Period:
The modern insurance sector began in the 19th century during British rule. The Oriental Life Insurance Company was the first insurance company established in 1818. - Post-Independence:
1956: Life insurance companies were nationalized, and the Life Insurance Corporation of India (LIC) was formed.
1972: General insurance was nationalized, leading to the formation of the General Insurance Corporation (GIC) and its subsidiaries. - Liberalization Period:
1999: The Insurance Regulatory and Development Authority (IRDA) was formed, allowing private companies and foreign investments in the insurance sector.
2. Regulatory Authority for Insurance Sector
The Insurance Regulatory and Development Authority of India (IRDAI) regulates the insurance sector to ensure policyholder protection and healthy growth.
- Roles of IRDAI:
- Issuing licenses to insurers and brokers.
- Monitoring insurance products and premium pricing.
- Ensuring transparency and policyholder grievance redressal.
- Promoting competition while safeguarding consumer interests.
Real-Life Example:
IRDAI mandates insurers to settle valid health insurance claims within 30 days, ensuring timely assistance to policyholders.
3. Private Investment in Insurance Sector
The liberalization of the insurance sector allowed private companies and foreign direct investment (FDI).
- FDI Limits:
Initially capped at 26%, the FDI limit was later increased to 49% in 2015 and 74% in 2021. - Impact of Private Investment:
- Increased competition and innovation.
- Availability of diverse insurance products.
- Better customer service and penetration in rural areas.
Real-Life Example:
Companies like HDFC Life and ICICI Prudential have introduced user-friendly digital platforms for policy management.
4. Structure of Insurance Business in India
4.1. Insurance Companies in the Public Sector
a. Life Insurance Corporation of India (LIC):
LIC was established in 1956 and is the largest life insurer in India.
- Organizational Structure (as on 31/03/2010):
- Central Office in Mumbai.
- Eight zonal offices, 113 divisional offices, and over 2,000 branch offices.
- Extensive agent network.
b. General Insurance Corporation (GIC):
GIC was formed in 1972 as a national reinsurer.
- Roles:
- Provides reinsurance support to domestic insurers.
- Promotes general insurance business across India.
c. Public Sector General Insurance Companies:
- New India Assurance Company.
- National Insurance Company.
- United India Insurance Company.
- Oriental Insurance Company.
4.2. Insurance Companies in the Private Sector
- Life Insurance Companies:
As of now, 23 private companies operate in life insurance. Examples include:- HDFC Life Insurance Company.
- ICICI Prudential Life Insurance.
- SBI Life Insurance.
- Max Life Insurance.
- General Insurance Companies:
There are 22 private companies offering general insurance. Examples include:- Bajaj Allianz General Insurance.
- Tata AIG General Insurance.
- Reliance General Insurance.
- ICICI Lombard General Insurance.
Real-Life Example:
HDFC Life introduced an online term plan, which gained popularity due to its affordability and convenience.
Summary
The insurance sector in India has evolved from ancient practices to a modern, regulated industry. The IRDAI plays a vital role in maintaining transparency and ensuring growth. Both public and private insurers contribute to the sector, offering diverse products and fostering competition.
10 Most Important Questions with Solutions
- Briefly explain the history of insurance in India.
Ans: Insurance in India began in ancient times with risk-sharing practices. Modern insurance started in 1818 with the Oriental Life Insurance Company, followed by nationalization post-independence and liberalization in 1999. - What is the role of IRDAI in the insurance sector?
Ans: IRDAI regulates the insurance industry by issuing licenses, monitoring products, ensuring transparency, and protecting policyholder interests. - Explain the impact of private investment in the insurance sector.
Ans: Private investment has increased competition, introduced innovative products, improved customer service, and expanded market penetration. - What are the key features of LIC’s organizational structure?
Ans: LIC has a central office in Mumbai, zonal and divisional offices across India, and a vast agent network. - Name four public sector general insurance companies.
Ans: New India Assurance, National Insurance, United India Insurance, and Oriental Insurance. - List some private life insurance companies in India.
Ans: HDFC Life, ICICI Prudential Life, SBI Life, and Max Life. - What is the significance of GIC in the Indian insurance market?
Ans: GIC acts as a national reinsurer, supporting domestic insurers and promoting general insurance business. - How has liberalization affected the Indian insurance industry?
Ans: Liberalization allowed private and foreign investments, enhancing competition, product diversity, and service quality. - Differentiate between life and general insurance companies.
Ans: Life insurance covers an individual’s life, while general insurance covers assets, health, and liabilities. - Discuss the evolution of FDI limits in the insurance sector.
Ans: FDI was initially capped at 26%, raised to 49% in 2015, and later to 74% in 2021, encouraging foreign participation and market expansion.
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