Essay on Insurance in India

659 Words Nov 25th, 2013 3 Pages
Insurance is the only sector which garners long term savings

Insurers are increasingly introducing innovative products to meet the specific needs of the prospective policyholders. An evolving insurance sector is of vital importance for economic growth. While encouraging savings habit it also provides a safety net to both enterprises and
Individuals.

Insurance Companies receive, without much default, a steady cash stream of premium or contributions to pension plans. Various actuary studies and models enable them to predict, relatively accurately, their expected cash outflows.

Liabilities of Insurance companies being long-term or contingent in nature, liquidity is excellent and their investments are also long-term in nature.
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According to preliminary estimates published by the Reserve Bank of India, contribution of insurance funds to financial savings was 14.2 per cent in 2005-06, viz., 2.4 per cent of the GDP at current market prices. Development of the insurance sector is thus necessary to support continued economic transformation. Social security and pension reforms too benefit from a mature insurance industry.

The insurance sector in India, which was opened up to private participation in the year 1999, has completed over seven years in a liberalized environment. With an average annual growth of 37 per cent in the first year premium in the life segment and 15.72 per cent growth in the nonlife segment, together with the largest number of life insurance policies in force, the potential of the Indian insurance industry is still large.

Life insurance penetration in India was less than 1 per cent till 1990-91. During the 1990s, it was between 1 and 2 per cent and from 2001 it was over 2 per cent. In 2005 it had increased to 2.53 per cent.

Spread of financial services in rural areas and amongst socially less privileged

IRDA Regulations provide certain minimum business to be done
- in rural areas
- in the socially weaker sections

Life Insurance offices are spread over nearly 1400 centres. Presence of representative in every tehsil –

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