With the opening of the insurance sector and entry of private sector companies, the competition has intensified not only between private and public sector companies but also amongst public sector companies. There is now a sense of benchmarking globally which is indeed a very healthy trend. This has resulted in development of new insurance products, reduction of premium, improved customer service, increased visibility through print & electronic media, discussions, symposia and seminars etc. ultimately benefiting the insuring public.

Since opening up, the number of participants in the industry has gone up from six insurers (including Life Insurance Corporation of India, four public sector general insurers and General Insurance Corporation as the national re-insurer) in the year 2000 to 47 insurers operating in the life, non-life and re-insurance segments as on date (including specialized insurers, viz., Export Credit Guarantee Corporation and Agricultural Insurance Company).

The post liberalization period has witnessed tremendous growth in the insurance industry, more particularly so in the life segment. The total premium underwritten by the industry has grown from Rs.34,898 crore in 2000-01 to Rs. 2,23,556 crore in 2008-09. The non-life insurers underwrote premium within India of Rs.30,601.20 crore in 2008-09, as against Rs.9,806.95 crore in 2000-01.

As we all know the insurance penetration and insurance density are two important indications of the potential and performance of the insurance sector. Insurance penetration which was 1.84% of GDP in 1996, has grown to 4.60 % of GDP in 2009. The low insurance penetration is partly due to lack of awareness on the part of general masses regarding the benefit flowing from the insurance and partly because of the lack of availability of insurance services to the large masses. Though there has been an effective outreach in life insurance, the general insurance still needs to work harder.

One of the important challenges before the insurance industry today is to generate the required level of awareness about the benefits of insurance to our people particularly living in semi-urban and rural areas. It should be our endeavor to take all necessary steps to ensure the reach of insurance to masses.

As for meeting their rural and social obligation, the insurance companies are now increasingly tapping the semi-urban and rural areas to spread the message of protection of life and property through insurance cover. The Government of India have also introduced many special products aimed at the rural markets like Jan Shree Bima Yojana, Universal Health Insurance Scheme, Aam Admi Bima Yojana, Crop Insurance, etc. for the benefit of poor and needy populace in the country.

One of the main objectives of promoting financial inclusion packages is to economically empower those sections of society which are otherwise denied access to financial services, by providing banking and credit services thereby focusing on bridging the rural credit gap. Lack of protective elements may do not serve the objective of promoting financial inclusion packages as the targeted section may fall back into the clutches of poverty in the event of unforeseen contingencies. Hence, to provide a hedge against these unforeseen risks, popularization of micro insurance is one of the essential ingredients of financial inclusion packages.

India is a country where large section of people are engaged in agriculture and the farmers are mostly dependent on monsoons. The crop insurance is still not popular among the farmers. At present only 20% farmers are covered under Agriculture Insurance Schemes. The schemes are implemented by 25 States and 2 Union Territories in the Country. Recognizing the importance of crop insurance as a critical risk management tool, we have taken a serious view of the huge gap between the amount of crop loan disbursed and that covered under the scheme.

India is a disaster prone country and has seen many devastating disasters in the recent past. There is immense need of disaster management in controlling catastrophic risk in India. The insurance industry should prepare to deal with any kind of catastrophic losses. The insurance companies should concentrate on exploring the world reinsurance market, so that the impact of heavy losses can be mitigated.

Growth in insurance industry has been spurred by product innovation, vibrant distribution channels coupled with targeted publicity and promotional campaigns by the insurers. Innovations have come not only in the form of benefits attached to the products, but also in the delivery mechanism through various marketing tie-ups both within the realm of financial services and outside. All these efforts have brought insurance closer to the customer as well as made it more relevant.

One of the crucial areas in the insurance sector is the adoption of new technology in the industry. It is an accepted fact that insurance business is technology driven.  It has the potential to save cost and hence, the scope for reducing price of product. Coming years will witness a total revolution in the ways of doing business.  E-commerce will be increasingly used in all sectors including banks and insurance and products will be sold on Internet.

With a fund size exceeding Rs.11 lakh crore, the insurance industry has contributed to the borrowing programme of both the Central Government and the State Governments as also to that of the public sector and the private sector.

With a force of around 30 lakh agents, it is a matter of pride that insurance industry is perhaps the only financial services arm that reaches out to almost all the villages in this country. This is also borne out by the fact that 25% of the life policies i.e. approximately 1.5 crore policies every year are sold in the rural areas.

However, there is still a very long way to go and further need to increase the penetration of insurance. With rising incomes in the country, the need for insurance is bound to rise and provides opportunity for the insurance industry to tap this growing need and provide insurance cover both life and non-life to the large masses of this country.

Source : This is based on The Finance Minister  Shri Pranab Mukherjee ‘s speech at the  inauguration of  the new building of Insurance Institute of India in Bandra Kurla Complex in Mumbai.

For more Reading

• INSURANCE REFORMS : WHOM WILL IT BENEFIT
• SEBI BANS 14 INSURANCE COMPANIES FROM RAISING MONEY
• 40 YEARS OF BANK NATIONALISATION – Pradip Biswas
• HEALTH CARE DEBATE IN US – R.ArunKumar