What Lies Beneath

Abstract

The modern concept of insurance practices in India started during the British rule in 1818 when Oriental Life Insurance Company was established in Calcutta. India became independent from British rule in 1946, and by 1956 the insurance sector was nationalized, with the Life Insurance Corporation of India created by combining almost 245 private life insurance companies; 107 private non-life companies combined in 1973 to form the General Insurance Corporation. But since the very purpose of nationalizing the insurance sector got sidelined due to the monopolistic power it enjoyed, coupled with the bureaucratic mindset of LIC and GIC, insurance again was opened to private players in 1999. During 2000–2006, almost 15 life and 13 non-life private insurance players (mostly joint ventures between Indian and foreign players) started operations in India, indicating the willingness of foreign institutional investors to enter the Indian insurance sector. But through all these major changes the actual impact was felt only in major urban areas, while the vast majority of the rural population was excluded from the insurance sector. Around the world, scholars and financial experts believe that in the next 5 to 10 years, India and China are going to be the targets for insurance companies. So far, most of the insurance companies in India are not actively tapping the huge potential of the rural markets. Unless the rural markets are given priority consideration, all predictions about future insurance industry potential in India are going to be distant dreams. The present insurance business is not even able to penetrate 20%–30% of the total population of 1.095 billion, and the projected population figure by 2025 will be approximately 1.501 billion. The order of the day will be to refocus on micro insurance in India to capture the huge potential of rural customers.