Indian Economy - INSURANCE IN INDIA

INSURANCE IN INDIA

Overview

• The first insurance company in India was the Oriental Life Insurance Company, founded in Calcutta 1818. However, it is now defunct
• The first Indian insurance company was the Bombay Mutual Life Assurance Society, founded 1870
• The oldest existing insurance company is the National Insurance Company, founded 1906
  
• Insurance was nationalised in 1956 and then opened up to private sector in 1999.
• Currently the government allows 26% FDI in the insurance sector
• The largest life insurance company in India is the Life Insurance Corporation
• Insurance falls under the purview of the Department of Financial Services, Ministry of Finance
  
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Nationalisation of insurance

• Life insurance in India was nationalised by the Life Insurance Corporation Act 1956
• All 245 life-insurance companies in India at the time were merged to form the Life Insurance Corporation (LIC).
• The General Insurance Business Act 1972 nationalised general insurance companies
• The existing 100 general insurance companies were amalgamated into the General Insurance Corporation of India (GIC).
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GOVERNMENT BODIES IN INSURANCE

All government bodies in insurance function under the Ministry of Finance unless otherwise noted
Life Insurance Corporation (LIC)

• Established 1956, headquarters Mumbai
• The LIC is the largest life insurance company in India and also the nation’s largest investor
  
• It funds close to 25% of the government’s expenses
• The LIC owns the following subsidiaries
  • Life Insurance Corporation of India International: provides USD denominated policies to NRIs
  • LIC Nepal
  • LIC Lanka
  • LIC Housing Finance
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General Insurance Corporation (GIC)

• Established 1972, headquarters Mumbai
• The GIC is a holding company for four subsidiary companies
  
  • Oriental Insurance Company Ltd (New Delhi)
  • New India Assurance Company Ltd (Mumbai)
  • National Insurance Corporation Ltd (Kolkata)
  • United India Insurance Company Ltd (Chennai)
• The GIC is the sole re-insurance company in India
  
• The GIC covers insurance for the entire spectrum of the economy from shoes to aircraft, from agricultural wells to oil wells, from chemical manufactures to satellite launches etc
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Insurance Regulatory and Development Authority (IRDA)

• Established 2000, headquarters Hyderabad
• The IRDA was set up to protect the interests of policy holders, and to regulate the growth of the insurance industry
• Some of the functions of the Authority include
  • Regulate investment of funds by insurance companies
  • Regulate maintenance of margin of solvency
  • Adjudicate disputes between insurers and intermediaries
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Agriculture Insurance Company (AIC)

• Established 2003, headquarters New Delhi
• The AIC is promoted by the GIC and NABARD
• The AIC is under administrative control of Ministry of Finance, but under operative control of Ministry of Agriculture
• The AIC offers area based and weather crop insurance schemes to farmers
  
• It is one of the largest agriculture insurance companies in the world
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POLICIES AND PROGRAMMES

Social Security Scheme

• A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker sections of society
• The SSF is administered by the LIC
  
• The SSF provides up to Rs 5000 on death from natural causes and Rs 25,000 upon death/disability due to accident
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Janashree Bima Yojana (JBY)

• The Janashree Bima Yojana was launched in 2000
• The JBY is a group insurance scheme. The minimum membership of the group should be 25 persons
• The JBY is administered by the LIC
  
• The JBY provides for insurance protection to rural and urban poor. The scheme covers BPL people and above poverty line people who belong to certain identified occupational groups
• The scheme provides for cover of Rs 20,000 on natural death. The scheme also provides pension of Rs 200
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Aam Aadmi Bima Yojana (AABY)

• Launched in 2007
• Provides insurance to the head of the family of rural landless households
  
• Covers natural death and accidental death/disability
• The scheme also provides additional benefit of scholarships for max two children between 9^th and 12^th standards
• Administered by the LIC
  
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Universal Health Insurance Scheme (UHIS)

• The UHIS is meant to improve access of health care to poor families
• Scheme provides for reimbursement of medical expenses, death and compensation due to loss of earning capacity
• The UHIS targets only BPL families
  
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National Agriculture Insurance Scheme (NAIS)

• Launched in 1999
• Protects farmers against losses due to natural calamities such as flood, drought, pestilence etc
  
• Scheme is implemented by the Agriculture Insurance Company (AIC)
  
• The Scheme is available to all farmers irrespective of the size of their land holdings
  
• The Scheme covers all food crops and oil seeds. It also covers some commercial and horticultural crops
• The scheme has until now covered more than 1.3 million farmers and 211 million hectares of land

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Pilot Weather Based Crop Insurance Scheme (WBCIS)

• Launched in 2007, on a pilot basis
• The WBCIS aims to cover farmers against anticipated crop failure due to adverse weather conditions
  
• The scheme is based on the fact that weather parameters can affect crop yield even when the farmer has taken all care to ensure a good harvest
  
• The payouts are based on historical data that determine weather thresholds/triggers beyond which crop losses are expected
  
• The WBCIS is implemented by the AIC
  
• The scheme is currently being implemented on 30 major crops including horticultural crops
  
• Currently the scheme covers more than 110,000 farmers and 1.4 million hectares of land

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