1273609, Pushpinder kalra , F2 , Q 13 , Comment on Competition and orderly growth in the sector

Q.1 <1273609–Pushpinder kalra – F2 – Arvind kumar – F1>http://youtu.be/R2_37pIeS3o

Q.2 1273609 <Pushpinder kalra F2, Q 13 – Comment on Competition and orderly growth in the sector>

Introduction

Insurance in India is the market for insurance in India which covers both the state and private sector organizations. It is listed in the Constitution of India on the Union list in the Seventh Schedule meaning it can only be legislated by the central government.
The insurance sector has gone through a number of phases by allowing private companies to solicit insurance and also allowing foreign direct investment of up to 26%. However, the largest life-insurance company in India, Life Insurance Corporation of India is still owned by the government and carries a sovereign guarantee for all insurance policies issued by it.

Discussion

The life insurance industry has entered a new phase, with the Insurance Regulatory and Development Authority granting registration certificates to new life-insurers, enabling them to set up shop soon. In the next few weeks, close to a dozen companies are expected to get their Registration Certificates. The market is also expecting select public sector banks to get clearance.

As insurance is a 'push' rather than a 'pull' product, it is a big challenge for the companies to make their products meaningful to prospective customers. As a first step, companies should simplify insurance products and design the benefits so as to suit the specific needs of policyholders, suggested the panel. The transparency on policy terms will ensure that the customer understands the product and its benefits, minimizing fears of being cheated. It is therefore important for the industry to invest not just in expansion and distribution but also in client servicing and processing.

The challenges are:

1.       Threat of New Entrants

2.       Power of Suppliers

3.       Power of Buyers

4.       Availability of Substitutes

5.       Competitive Rivalry

Growth in insurance sector

The industry is on its way to development and a number of factors govern that growth.

1.   India’s insurance industry has witnessed rapid growth during the last decade. Consequently, many foreign companies have expressed their interest in investing in domestic insurance companies, despite the Government of India’s regulation, which mandates that the foreign shareholding limit is fixed at 26% for the life as well as non-life insurance sectors.

2.   The development of the insurance industry in India is likely to be critically dependent on the nature and quality of regulation. Overall, the regulatory environment is favorable and takes care that players maintain prudent underwriting standards, and reserve valuation and investment practices. The primary objective for the current regulations is to promote stability and fair play in the market place.

Conclusion

A well developed and evolved insurance sector is a boon for economic development of a country. It provides long-term funds for infrastructure development and concurrently strengthens the risk-taking ability of the country. India’s rapid rate of economic growth over the past decade even after facing so many challenges has been one of the most significant developments in the global economy.