Insurance landscape – How insurance in India has evolved over the years?
A man who dies without adequate life insurance should have to come back and see the mess he created. – Will Rogers
This earliest traces of insurance in India can be found in the writings of Manu (Manusmrtithi), Yagnavalkya (Dharasastra), and Kautilya (Arthasastra). The writings talk about pooling resources that can be re-distributed in the times of disasters, like floods, famine, epidemics. This can be referred to as the precursor to modern-day insurance.
As per the Economic Survey 2018 insurance penetration has risen to be an integral part of the financial planning of 3.49% Indians and provides a safety umbrella for many families against unpredictable situations. Though this number might seem low as compared to other countries, it is the highest penetration India has seen since decades.
The journey of Life Insurance in India in India has evolved drastically over time. Let have a look how.
The initial establishment
India observed the advent of life insurance business in 1818 with the establishment of British Company, the Oriental Life Insurance Company in Calcutta. The company was started by Europeans, exclusively to serve their community, and failed in 1834.
The rise of the Indian insurance company
Indians step into the insurance business due to pioneering efforts of social workers and reformers, including Raja Rammohan Ray, Ramatam Lahiri, Dwarakanath Tagore, Rustomji Cowasji among others. The efforts lead to the founding of the first Indian insurance company under the name ‘Bombay Life Insurance Society’ that started operating in 1870 and offered Life Insurance Plans to Indians at standard rates.
The landmark decision
The life insurance business in India was first regulated in 1912 which observed the Indian Life Insurance Companies Act. The first regulation regarding life insurance in India came in 1914 when the government of India started publishing returns of Life Insurance Companies in India. The Indian Insurance Companies Act in 1982, enabled the Government to collect statistical information about the insurance business transacted in India including Indian and foreign insurers. The earlier legislation was consolidated and amended by the Insurance Act in 1938 that included detailed provisions for effective control over the activity of insurers.
The historic moment
In January 1956, the Government of India nationalized the life insurance industry with establishing Life Insurance Corporation of India (LIC) that absorbed 245 life insurance companies and became the sole provider.
Constitution of IRDA
Following the recommendations of the Malhotra Committee Report (1999), the Insurance Regulatory and Development Authority (IRDA) was constituted. The aim was to regulate and develop the insurance industry. 49% FDI allowed in the Insurance Industry. Commercial union sets up a representative office in India.
The key objectives of IRDA were to facilitate competition, thereby enhance customer’s satisfaction with increased choices and lower premiums for the consumer. It was also formed to ensure the financial security of the insurance market.
The Industrial Policy – the new ray of hope
In 1991, the Indian Government implemented the New Industrial Policy, under which the Indian economy was opened up for foreign investment. It leads to the reformation of sectors, like banking and finance. The life insurance industry in India was liberalized in 2000 with the prime objective of increasing competition in the industry and to ignite the immense potential that this rapidly growing market has to offer. With this landmark incident, LIC’s monopoly over life insurance in India came to an end.
The current scenario
No sector is untouched by the digital revolution, and insurance is no exception. This largest trend has transformed the current insurance industry. The explosion of tablets, smartphones and other gadgets along with advanced technologies, like artificial intelligence and chatbots have enabled insurers to revamp their business models.
All these features have enabled Aviva to deliver world-class experience to customers through various digital channels. With this, Aviva is proud to launch ALISHA (Aviva Life Insurance Self Help Assistant) – Aviva India’s chatbot powered by artificial intelligence, who is self-sufficient to cater to customers’ queries 24/7. Guided by the principles of Digital First and Innovation, Aviva has also launched voice as a service with ‘Insurance Made Simple’ – an Amazon Alexa Skill. With this, Aviva is trying to combat the biggest challenge for the insurance customers in the industry, i.e. to decode the complex jargons used in the life insurance industry.
The combination of the right data and technology has completely reformed the insurance industry as well as the customers’ experience. With improved and direct interactions with the customers, insurers are offering the right products at the right time, based on customers’ needs. Thus, it is not an exaggeration to say that the insurance industry is the key player in the financial independence of Indians.