Even more than 50 years after independence from almost two centuries of British rule, large scale poverty remains the most shameful blot on the face of India.
India still has the world’s largest number of poor people in a single country. Of its nearly 1 billion inhabitants, an estimated 350-400 million are below the poverty line, 75 per cent of them in the rural areas.
More than 40 per cent of the population is illiterate, with women, tribal and scheduled castes particularly affected.
It would be incorrect to say that all poverty reduction programmes have failed. The growth of the middle class (which was virtually non-existent when India became a free nation in August 1947) indicates that economic prosperity has indeed been very impressive in India, but the DISTRIBUTION OF WEALTH has been very uneven.
The main causes of poverty are illiteracy, a population growth rate by far exceeding the economic growth rate for the better part of the past 50 years, protectionist policies pursued since 1947 to 1991 which prevented large amounts of foreign investment in the country.
Poverty alleviation is expected to make better progress in the next 50 years than in the past, as a trickle-down effect of the growing middle class. Increasing stress on education, reservation of seats in government jobs and the increasing empowerment of women and the economically weaker sections of society, are also expected to contribute to the alleviation of poverty.
Eradication of poverty can only be a very long-term goal in India.
Indian insurance market size is presently estimated at US$ 66-70 million. By 2005, it is expected to grow five-fold to US$ 377 million. In 2000-01 fiscal year, total premiums stood at US$ 9933 million which is 0.41 percent of total global premiums of US$ 2443.6 billion. Total premiums of Indian insurance industry in 2000-01 fiscal was 2.32 percent of country's GDP. Per capita premium stood at US$ 9.9. Indian insurance market potential could be gauged by the fact that currently about 40-42 million people have been brought under insurance whereas the potential is estimated at 200-250 million. Insurance companies could tap only 5 percent of Indian middle class segment.
In India, insurance is generally considered as a tax-saving device instead of its other implied long term financial benefits. Indian people are prone to investing in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. Even to this day, Life Insurance Corporation of India dominates Indian insurance sector. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant.
Indian federal government considers insurance as one of major sources of funds for infrastructure development. The government has identified the following as major thrust areas:
Timely and reliable statistical data and information about policies and markets to instill a degree of credibility;
A code of good practices based on international best practices to raise the standard of Indian insurance sector;
Strengthening of supervision and regulation;
Market participation in decision-making;
High solvency standard' and Developing alternative channels.
Till end of 1999-2000 fiscal year, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance (both life and non-life) providers in India. Under GIC there were four subsidiaries -- National Insurance Company Ltd, Oriental Insurance Company Ltd, New India Assurance Company Ltd, United India Assurance Company Ltd. In fiscal 2000-01, the Indian federal government lifted all entry restrictions for private sector investors. Foreign investment insurance market was also allowed with 26 percent cap.
GIC was converted into India's national reinsurer from December, 2000 and all the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.
Indian Parliament has cleared a Bill on July 30,2002 delinking the four subsidiaries from GIC. A separate Bill has been approved by Parliament to allow brokers, cooperatives and intermediaries in the sector.
Currently insurance companies- both private and public-- has to cede 20 percent of its reinsurance with GIC.
GIC is planning to increase re-insurance premium by 20 percent which works out at Rs 3000 cr.
GIC is actively considering entry into overseas markets including West Asia, South-east Asia and SAARC region.
To regulate, promote and ensure orderly growth of the insurance business and re-insurance business, a regulatory authority -- Insurance Regulatory and Development Authority (IRDA) -- was set up under IRDA Act, 1999. IRDA is composed of a chairman, five wholetime members and four part-time members. There are four types of Indian insurance business : Life, Fire, Marine, and Miscellaneous. In life insurance more than 80 percent business relates to Endowment Assurance (Participating) and Money Back (participating). Motor Vehicles insurance is compulsory in India.
Indian insurance industry has Ombudsmen in 12 cities empowered to reduce customers grievances in respect of insurance contracts on personal lives where the insured amount is less than Rs 20 lakhs.
In the first year of insurance market liberalisation (April 2-December 31, 2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Since then, till June, 2002 two more joined the life insurance sector. Thus in all there are 18 players (12 life insurance and 6 general insurance) in the Indian insurance industry till date.
Upto end 2001, 16 insurance players had made a total investment of Rs 1910.95 crore including investments made from policyholders' funds. In life category Allianz Bajaj topped the list with Rs 147.01 crore closely followed by Om Kotak's Rs 146.25 crore and ICICI Prudential's Rs 134.64 crore. In non-life segment, Tata AIG General led the list with Rs 161.68 crore followed by Reliance General's Rs 121.86 crore and Royal Sundaram's Rs 111.86 crore.
Foreign equity in broking firms is capped at 26 percent.
Brokers have been divided into four categories: Direct general insurance broker (category I); Direct life insurance broker (category II); Reinsurance broker (category III); and Composite broker ( category IV).
Categorywise networth for insurance brokers is : Rs 25 lakhs for category I and category II; Rs 2 crore for category III and Rs 3 crore for category IV.
For insurance consultants, networth is Rs 10 lakhs.
In India, motor vehicle insurance premium is 2.5 percent of the vehicle cost against international standard of 6 percent.
The Indian insurance regulatory authorities has asked the insurance companies operating in the country to take into account the investment income earned on the funds earmarked for outstanding claims, unreported claims and unexpired risks while calculating the underwriting margins. These funds are called technical funds belonging to the policyholders. Hence the income earned on such funds should be considered as contributions from the policyholders of the concerned insurance companies.
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Even more than 50 years after independence from almost two centuries of British rule, large scale poverty remains the most shameful blot on the face of India.
India still has the world’s largest number of poor people in a single country. Of its nearly 1 billion inhabitants, an estimated 350-400 million are below the poverty line, 75 per cent of them in the rural areas.
More than 40 per cent of the population is illiterate, with women, tribal and scheduled castes particularly affected.
It would be incorrect to say that all poverty reduction programmes have failed. The growth of the middle class (which was virtually non-existent when India became a free nation in August 1947) indicates that economic prosperity has indeed been very impressive in India, but the DISTRIBUTION OF WEALTH has been very uneven.
The main causes of poverty are illiteracy, a population growth rate by far exceeding the economic growth rate for the better part of the past 50 years, protectionist policies pursued since 1947 to 1991 which prevented large amounts of foreign investment in the country.
Poverty alleviation is expected to make better progress in the next 50 years than in the past, as a trickle-down effect of the growing middle class. Increasing stress on education, reservation of seats in government jobs and the increasing empowerment of women and the economically weaker sections of society, are also expected to contribute to the alleviation of poverty.
Eradication of poverty can only be a very long-term goal in India.
Indian insurance market size is presently estimated at US$ 66-70 million. By 2005, it is expected to grow five-fold to US$ 377 million. In 2000-01 fiscal year, total premiums stood at US$ 9933 million which is 0.41 percent of total global premiums of US$ 2443.6 billion. Total premiums of Indian insurance industry in 2000-01 fiscal was 2.32 percent of country's GDP. Per capita premium stood at US$ 9.9. Indian insurance market potential could be gauged by the fact that currently about 40-42 million people have been brought under insurance whereas the potential is estimated at 200-250 million. Insurance companies could tap only 5 percent of Indian middle class segment.
In India, insurance is generally considered as a tax-saving device instead of its other implied long term financial benefits. Indian people are prone to investing in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. Even to this day, Life Insurance Corporation of India dominates Indian insurance sector. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant.
Indian federal government considers insurance as one of major sources of funds for infrastructure development. The government has identified the following as major thrust areas:
Timely and reliable statistical data and information about policies and markets to instill a degree of credibility;
A code of good practices based on international best practices to raise the standard of Indian insurance sector;
Strengthening of supervision and regulation;
Market participation in decision-making;
High solvency standard' and Developing alternative channels.
Till end of 1999-2000 fiscal year, two state-run insurance companies, namely, Life Insurance Corporation (LIC) and General Insurance Corporation (GIC) were the monopoly insurance (both life and non-life) providers in India. Under GIC there were four subsidiaries -- National Insurance Company Ltd, Oriental Insurance Company Ltd, New India Assurance Company Ltd, United India Assurance Company Ltd. In fiscal 2000-01, the Indian federal government lifted all entry restrictions for private sector investors. Foreign investment insurance market was also allowed with 26 percent cap.
GIC was converted into India's national reinsurer from December, 2000 and all the subsidiaries working under the GIC umbrella were restructured as independent insurance companies.
Indian Parliament has cleared a Bill on July 30,2002 delinking the four subsidiaries from GIC. A separate Bill has been approved by Parliament to allow brokers, cooperatives and intermediaries in the sector.
Currently insurance companies- both private and public-- has to cede 20 percent of its reinsurance with GIC.
GIC is planning to increase re-insurance premium by 20 percent which works out at Rs 3000 cr.
GIC is actively considering entry into overseas markets including West Asia, South-east Asia and SAARC region.
To regulate, promote and ensure orderly growth of the insurance business and re-insurance business, a regulatory authority -- Insurance Regulatory and Development Authority (IRDA) -- was set up under IRDA Act, 1999. IRDA is composed of a chairman, five wholetime members and four part-time members. There are four types of Indian insurance business : Life, Fire, Marine, and Miscellaneous. In life insurance more than 80 percent business relates to Endowment Assurance (Participating) and Money Back (participating). Motor Vehicles insurance is compulsory in India.
Indian insurance industry has Ombudsmen in 12 cities empowered to reduce customers grievances in respect of insurance contracts on personal lives where the insured amount is less than Rs 20 lakhs.
In the first year of insurance market liberalisation (April 2-December 31, 2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Since then, till June, 2002 two more joined the life insurance sector. Thus in all there are 18 players (12 life insurance and 6 general insurance) in the Indian insurance industry till date.
Upto end 2001, 16 insurance players had made a total investment of Rs 1910.95 crore including investments made from policyholders' funds. In life category Allianz Bajaj topped the list with Rs 147.01 crore closely followed by Om Kotak's Rs 146.25 crore and ICICI Prudential's Rs 134.64 crore. In non-life segment, Tata AIG General led the list with Rs 161.68 crore followed by Reliance General's Rs 121.86 crore and Royal Sundaram's Rs 111.86 crore.
Foreign equity in broking firms is capped at 26 percent.
Brokers have been divided into four categories: Direct general insurance broker (category I); Direct life insurance broker (category II); Reinsurance broker (category III); and Composite broker ( category IV).
Categorywise networth for insurance brokers is : Rs 25 lakhs for category I and category II; Rs 2 crore for category III and Rs 3 crore for category IV.
For insurance consultants, networth is Rs 10 lakhs.
In India, motor vehicle insurance premium is 2.5 percent of the vehicle cost against international standard of 6 percent.
The Indian insurance regulatory authorities has asked the insurance companies operating in the country to take into account the investment income earned on the funds earmarked for outstanding claims, unreported claims and unexpired risks while calculating the underwriting margins. These funds are called technical funds belonging to the policyholders. Hence the income earned on such funds should be considered as contributions from the policyholders of the concerned insurance companies.
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