Overview on Reforms of Insurance Sector in India

The insurance reforms in India were brought by the insurance regulations and the Development Authority of India. They brought it about by passing a bill relating to insurance reforms through the Parliament. The regulators were looking forward to bringing more reforms in the Insurance sector in India till June 2015 which will lead to developments in the insurance sector.

The insurance reforms in India started with building a committee that will talk about the insurance reforms and the main objective will be to improve and lead to developments in the insurance sector. The committee was led under the chairmanship of DR. R.N. Malhotra was RBI’s ex-governor and it was formed to cross-check the working of the insurance sector in India. 

Reforms of Insurance Sector in India

In 1993, the Malhotra committee was led by the RBI governor and the former finance secretary. The main objective of the committee was to create a better financial system. Some of the recommendations that were kept were:

• In every insurance company, the government should have a stake of 50%
• If private companies enter the market, they should have a capital of 1 billion rupees. 
• One company can either deal with general insurance or with life insurance.
• There should be a tie up between foreign and domestic companies in order to get the foreign companies in the Indian market.
• Changes should be made in the insurance act
• A regulatory body for the insurance sector should be made.

Challenges and Opportunities Faced by the Insurance Industry

There are many challenges and opportunities for the insurance sector in India, some of the challenges are given below:

Low Insurance Penetration

It has been a problem that has been lying in the insurance sector for more than a decade. Life insurance companies are basically privately owned and focus on urban areas. After the introduction of IRDA in 1991, this challenge was starting to go down as the objective of IRDA was to regulate the insurance sector. 

Lack of Adequate Capital Requirements

As one can say, low penetration will definitely lead to low capital funds. Low capital funds thus lead to the non-expansion of the insurance sector. So to create a boost in the insurance sector, the foreign direct investment was increased from 49% to 74%. This is an important reform in the insurance sector in India.

Some of the opportunities faced by the insurance sector in India are:

Social Approach

As we all know that social media has a huge market, so it is a great opportunity for insurance companies because as they advertise their insurance through social media apps then it is sure that it will help them in bringing out more people in their insurance companies.

Awareness Programs

Insurance sector companies should hold awareness programs that will definitely create awareness regarding insurance and let people know what insurance really is because there are many misleading points on insurance.

Conclusion

With the support of reforms in the insurance sector in India, the insurance sector sees a development that further improves the present conditions of insurance companies. The sector of insurance is important as it contributes well to the financial sector of the country. The insurance sector faces challenges and opportunities which help them to become stronger. An insurance company builds many job opportunities, there are nearly 56 companies and the jobs offered by these 56 companies are over 45 lakhs. Reforms in the insurance sector are very important because changes should be done, one cannot carry on the business with the same mindset of the 18th century in the 21st century. It is almost impossible to carry out like this.