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Since the opening up of the insurance sector, the number of participants in the insurance industry has gone up from seven insurers (including the Life Insurance Corporation of India [LIC], four public-sector general insurers, one specialised insurer, and the General Insurance Corporation as the national re- insurer) in 2000 to 52 insurers as on 30 September 2012 operating in the life, non-life, and re-insurance segments (including specialised insurers, namely the Export Credit Guarantee Corporation and Agricultural Insurance Company [AIC]). Four of the general insurance companies, viz., Star Health and Alliance Insurance Company, Apollo Munich Health Insurance Company, Max BUPA Health Insurance Company, and Religare Health Insurance Company function as standalone health insurance companies. Of the 23 insurance companies that have set up operations in the life segment post opening up of the sector, 21 are in joint ventures with foreign partners. Of the 21private insurers who have commenced operations in the non-life segment, 18 are in collaboration with foreign partners.
After the state monopoly in the insurance sector was dismantled and private players’ entry allowed, the IRDA has played a crucial role in the development and expansion of the sector, there is no doubt in it. But still the sector faces many challenges which, if only tackled well may one say that insurance is serving the interests of the insuring companies and the covered alike. As per the concerned experts, the major challenges Indian insurance is facing today may be seen as given below:
(i) As per various estimates, only 20 per cent of the insurable Indian population is life-insured; the share of India in global life insurance is
just 0.66 per cent; and life insurance penetration is at present 2.53 per cent (2004) in the country.10
The message of life insurance needs to be publicised among the population, specially in the rural areas. Moreover, social security schemes should be expanded to cover the poor masses who lack the premium-paying capacity.
(ii) Experts suggest that health insurance could emerge among the most important factors of improving human development in the country if expanded in a focussed way and via an action plan. It is estimated that around 15 per cent of the Indian population is covered under some form of pre-payment on healthcare which includes employees and beneficiaries covered under ESIS, CGHS, Armed forces, Central Police organisations, Railways, employer self-funded schemes, the PSUs and pensions covered under health insurance.11 As the out of pocket expenditure in India is as high as 70 per cent, it is believed that the health insurance sector in the country needs strong presence. As per the NSSO (2015), the coverage of the government-funded health insurance schemes are 13.1 per cent in rural areas and 12 per cent in urban areas (Economic Survey 2015–16).
(iii) After the general insurance industry was opened up (2000) for the private sector participation, the experience has been positive.12 Its growth compares favourably with that of many other emerging markets and is in line with global benchmark of two to three times the growth in GDP.13 As the economy is on a strong growth path and the capital expenditure planned across industries is estimated to be over Rs. 9,00,000 crore over the next four to five years, a better scope for the general insurance expansion is probable.14 The growth in both commercial and personal lines of general insurance business reflects positive trends. Over 70 per cent of India’s population lives in rural areas and along with organised financial services, general insurance companies are also expanding into these sectors.
(iv) People in their lives experience financial difficulties that can affect the entire family negatively, this is more true about the poor masses in India.
This is why experts suggested for the provision of micro insurance. A relatively new concept, micro insurance is today provided to the beneficiaries of micro finance covering the finance amount, reducing the risk of the clients as well as the micro-finance institutions (MFIs).15
The concept of micro insurance has been developed by the private insurance company Aviva Life Insurance (in partnership with MFIs) which has forged alliances with banks like Canara Bank, P&SB, RRBs, 23 cooperatives, etc., to promote micro finance.
Micro insurance has evolved in the past two decades of research in micro finance and has seen growth in countries like Sri Lanka, Philippines in the last decade.16 Here NGOs and people’s organisations are allowed to register themselves as micro insurance companies which sell such insurance. As they cover the risk themselves, they are allowed to reinsure with one of the large global companies like Swiss Re or Munich Re. Same model is suggested for India but for this to happen drastic changes in the existing insurance rules are required.17
(v) Many of the experts believe that insurance industry should benefit the insurers, reinsurers as well as the insured. The social purpose of the insurance sector is never praiseworthy to be marginalised by the corporate interests (be domestic or foreign)—at least it does never taste good in India which needs a strong social safety net.18
(vi) Almost all of the private insurance companies in India have been demanding that the government-owned insurance companies (i.e., LIC and the four general insurance companies) should be converted into private sector companies. Their reasons are logical as in comparison with the government-owned insurance companies, private companies are always ready with highly attractive and lucrative insurance schemes, but they have not been able to attract the clients for them. Therefore, the private insurance companies have been fetching huge operational losses due to lack of the desired level of their expansion and the overhead expenditure.19