The industry was opened up for private sector in 2000. The arguments advanced in favour of liberalisation of insurance industry were that the government monopoly had resulted in lack of enthusiasm and commitment in spreading the message of insurance resulting in low insurance penetration (insurance premium as share of gross domestic product) and insurance density (insurance premium per capita); the mobilisation of savings through insurance was far below the potential; quality of customers' services was poor; the innovative and tailor-made products were lacking; productivity was low and spread of technology was inadequate.
Private companies commenced their operations in 2001.The present paper seeks to examine the emerging trends in post liberalisation era, which broadly reflects upon the future shape of growth of insurance industry to emerge.
One of the distinct emerging trends after liberalisation had been gradual coverage of uninsured population. With a total of 14 life and 14 non- life companies, the insurance penetration increased from 1.95% in 1997 to 2.88% in 2003. Although it is still distinctly low compared to Asian average of 7.49%, world average of 8.07% and some of the Asian countries averages like Japan (10.65%), South Korea (9.69%), Singapore (7.59%)and Malaysia (5.27%).
Similarly insurance density has gone up from $7.6 to $16.4 during the above period, but India still compares very low against Asian and world average of $182.8 and $470.1 respectively. Further, it was as high as $3721 in Japan, $1250.9 in South Korea, $1630.6 in Singapore and $226.4 in Malaysia. The insurance premium as a share of world premium has risen to 0.61% in 2003 from 0.42% in1997, although it is far below the Asian share of 23.23% and against the share of Japan (16.04%), and South Korea (2.04%).
The share of insurance funds in gross financial savings of household sector has accelerated to 14% in FY2004 from 12% in FY2000.The private life and non- life insurance companies have been able to mobilise funds for investment to the tune of Rs 287.2 crore and Rs 1850.3 crore respectively.
Third, the entry of new players has induced significant growth in the insurance business. The first year business premium of life insurance and gross domestic premium of non-life companies grew by 35.8% and 12.8% in FY2005 respectively.
During this era new channels of marketing insurance products such as brokers and bank assurance have emerged. Traditionally distributional channels were confined to agents, development officers, and branch and designated offices of insurance companies. Presently about 194 licensed brokers are functional and majority of insurance companies have tied up with banks for marketing their products.
One of the most significant trends during this period had been substantial expansion of employment opportunities in insurance industry. During this era, 21 private insurance companies, 194 broking companies and 123 'third party administrators' have been set up. Licenses of 12,000 surveyors and 2,12,240 have been renewed. It is estimated that a total of about 6 lakh new jobs have been generated in the industry after liberalisation. Additionally, there would have been indirect generation of employment of a few lakhs through multiplier effect but for which authentic data is not available.
New products are being introduced in the market. On life side some of the new products relate to unit-linked policies, capital guaranteed unit linked plans, pension plans and keyman insurance policies. On the non-life side new products relate to index/weather-based policies for crop insurance, liability covers for software companies, coverage of outstanding credit of cardholders etc.
To meet risk relating to militancy and terrorism 'terrorism pool' has been set up. The growth of 'micro finance' covering the financial needs of poor is in the offing. As regards quality of customer services, the healthy competition amongst the different companies assures improvement.
Concepts like 'customer relationship' are being introduced. Facilities such as SMS, tele-calling, mailing reminder letters on policy lapse, e-mail communications are being deployed to be in constant touch and take feedback from customers during life cycle of the policy.
The payment of premium has also been streamlined giving option to the customers for direct debit from bank account, credit card payment and drop box facility etc. However, in case of claim settlement particularly those relating to individuals, entrepreneurs and traders, there has not been significant improvement.
As reviewed above, the emerging trends during post- liberalisation have been positive, healthy, encouraging and growth friendly. Foreign participation has resulted in increased flow of foreign funds, infused new technology in the industry, contributed in enhancing both short and long-term savings and accelerated employment opportunities, which should be appreciated by any political party with whatever political ideology it inherits. The opposition to the enhancement of foreign direct investment from 26% to 49% is hardly based on economic rationality and wisdom.
DC Srivastava is a retired IES officer and Shashank Srivastava works for Dubai International Financial Centre, Dubai