Life Insurance And Pensions In India Economics Essay

Life insurance and Pension Schemes is an emerging and fast turning market in the Indian economic system. Presently, it is still in its naif phases where the market incursion is comparatively low as compared to other Asiatic states.

In this study we look into the current position of the Life Insurance Business in India and its farther growing chances.


Beginnings of insurance in India can be traced down to the Vedas. For e.g. the name of Life Insurance Corporation of India ‘s central office name yogakshema is derived from the Rig-Veda. The term suggests that a signifier of ‘community insurance ‘ was prevalent around 1000 BC and was practiced by the Aryans.

In the mid 1950 ‘s around 170 insurance companies and 80 provident fund societies operated in India. Due to troubles in direction, abnormalities, scams the Government of India decided to nationalize all these companies and the parliament of India passed the Life Insurance Corporation Act on 19th June 1956.The Life Insurance Corporation of India was formed on 1st September 1956 ( hypertext transfer protocol: // ) .

Since so it held maximal market portion of the life insurance concern in India.

Along with the growing of economic system there was a demand to privatize insurance sector. Finally, in the twelvemonth 2000- 2001 Insurance Regulatory and Development Authority ( IRDA ) issued licences to new entrants therefore opening up the life insurance sector of India to private companies. Presently, there are 23 life insurance companies runing in India where about all of them holding coaction with another foreign insurance company.

The foreign companies holding a joint venture with the Indian insurance company have a 26 % cap on their equity bets. However, this cap is expected to lift up to 49 % ( http: // ) . Currently, all the insurance companies work harmonizing to the guidelines set up by the IRDA.

India is already a $ 1 trillion economic system where the life insurance concern is turning manifolds nevertheless the incursion is still low. Presently, life insurance premium in India is about 4 per cent. Merely 26 per centum of the rural population and 60 per centum of the urban population is insured. This shows that a big figure of the population does non hold any insurance or pension screen and there is a immense chance for premium enlargement ( hypertext transfer protocol: // “ hypertext transfer protocol: // ” economy-by-2014-15.htm ) . Health Insurance is besides really less. Insurance provides fiscal security in inauspicious state of affairss and besides reduces authorities liabilities towards the societal public assistance. Denationalization has brought better quality merchandises suited to the client ‘s demands and has besides provided a combination of insurance and investing.


Are there any growing chances of the insurance sector in India?

What methods can be implemented to increase the insurance concern in India?


To analyze and understand the bing state of affairs of the insurance and pension market in India.

To understand the troubles faced by the insurance companies in increasing the market incursion, consciousness of insurance and give suggestions on it.

To foretell the hereafter growing chances of the insurance and pension concern in an emerging state like India.

Current scenario of insurance sector in India:

The primary intent of holding Life Insurance is to cover the fiscal loss caused by individual ‘s decease.Although decease in a individual ‘s life is certain, the clip and fortunes are unsure. So, it can be said that life is full of uncertainnesss. Insurance gives peace of head to the holder as he is cognizant that his dependants will hold fiscal support even after he dies.

India is a state with a GDP of 7.20 percent one-year rate ( hypertext transfer protocol: // Symbol=INR ) where still a big ball of population remains uninsured largely the rural portion of the state. Peoples in small towns live in poorness, unhygienic, bad conditions and less medical installations. Their per capita income every bit good as ingestion is low and they are more prone to diseases as compared to the urban population.

In the urban portion there is an addition in life anticipation, lessening in child mortality rate, rising prices, addition in literacy rate and addition in occupation chance. Due to this a big figure of people belongs to the working class and most of them are uninsured.

The younger age group tend to set about be given to be more hazard prone. Insurance can supply them protection, investings and retirement benefits. Rise in life anticipation is besides making more demands of pension programs.

There is besides an addition in the uncertainties/volatilities faced in life e.g. loss of life in terrorist onslaughts. The importance of life insurance was felt following the terrorist onslaughts in Mumbai ( Nov 2008 ) .

In a fast turning economic system like India the criterion of life is besides lifting. This means that the assets owned by people are increasing and so is the value of a individuals life. Insurance becomes necessary in such conditions. The difference between developed states and developing states is that insurance is bought in developed states but it is sold in developing states. A big sum of Indian market still remains untapped and with this current economic growing rate India is fast traveling towards developed state ‘s class where insurance will go about a necessity of life.

Insurance companies believe that if the equity bets of their foreign spouses are increased up to 49 % so they would hold more capital to put up new substructure, engineering, expertness and other modern installations in rural India. This would assist in increasing the insurance concern in rural India.

A well-developed insurance industry is required for the steady economic growing of a state as it develops the hazard taking abilities of companies and endeavors. The brotherhood budget 2010 indicates that all the insurance companies will stay in the populace sector. Government of India will back up the growing of the insurance industry, aid to keep competitory environment and will besides back up capital extract ( hypertext transfer protocol: // )

A big portion of the population remains uninsured and without pension screens. With the authorities halting to supply pension to its employees, high population working in the private sector, the addition in life anticipation in India, rising prices more and more population will hold no pension screen every bit good as insurance screen. Awareness about the demand of insurance is really low in rural India. A big portion of population can non afford to pay the high premiums.


In this undertaking I intend to hold a thorough apprehension of the facts and the present state of affairs of the Insurance industry in India. I will do a elaborate survey of the troubles faced by the insurance companies in increasing their market incursion and suggest on it. My research would be generic and I would wish to measure the hereafter growing chances of insurance and pension programs in India. For this, I would be doing a thorough scrutiny of the secondary informations, make a questionnaire on the undermentioned parametric quantities and seek to happen out the possible consequence on the insurance concern in India if any alterations are made in these parameters-

Whether a bulk of the Indian population feels the demand of life insurance or pension screen?

The current costing of the insurance merchandises, affordability and do they provide the demands of the consumer?

Should the Insurance Companies take enterprises such as increasing the consumer consciousness about the importance of insurance?

Will the increase the fiscal literacy of people affect the insurance concern in a positive manner? What methods can be adopted to increase the literacy?

Will presenting more cost-risk combined, flexible and crystalline insurance merchandises which offer investing every bit good as insurance options be more suited to the demands of the Indian consumers?

Promotion of life insurance and pension programs as an of import investing and protection tool instead than a revenue enhancement salvaging tool.

Consumers view if any add-on benefits or inducements are provided to persons puting in insurance on a long term position.

Their experience about the after gross revenues service from the private insurance companies every bit good as LIC because LIC has been a dominant participant for all these old ages.

Would consumers prefer to purchase insurance merchandises through trained insurance agents, gross revenues individuals from the company, Bankss and cyberspace?

Would alterations in the committee construction of the insurance agents make any consequence on the insurance concern? This will be in mention to the incorrect gross revenues tactics used by some insurance agents in order to derive more committee.

Insurance is a concern where consumers trust on the company is a really of import factor. Does a boring claim colony procedure of the insurance company or any judicial proceeding ( if involved ) discourage people from purchasing insurance merchandises in future?

Consumers view about the current revenue enhancement freedom bounds on insurance merchandises.