With IRDA (Insurance Development and Regulatory Authority) granting licences to three private institutions and in principal clearance to few others, the private insurance sector has opened up.

The private insurance companies are making a comeback after 44 years. In 1956, the Indian government had taken over the business of over 200 private and foreign insurance companies.

HDFC-Standard Life (Housing Development Finance Corporation Ltd) has become the first life insurer in the private sector to obtain a registration from the IRDA. The other two companies (in non-life insurance) to get a green signal from IRDA, are Reliance and Royal Sundaram Alliance. The three applicants to receive an in-principal clearance are-Max New York Life, ICICI Prudential Life and IFFCO Tokio General Insurance.

IRDA has yet to come out with guidelines on the pension funds. As per the IRDA guidelines, 5% of the total policies sold by these registered companies in the 1st year should be from rural sector. This percentage should go up every year by 2.5% thus making it 15% in the 5th year. Though IRDA has granted permission to these companies to start their businesses right away, it is assumed that the soft launch of products will take them atleast 3 months. To float the complete range of products, another 6 months would be required.

With the monopoly of LIC (Life Insurance Corporation of India) coming to an end, the service industry for insurance is bound to improve. Companies will also launch innovative insurance products to compete for market share. If the cost of insurance comes down, premium amounts for insurance would fall substantially. The wider choice of insurance products, coupled with better service levels and lower premiums, will motivate more people to go in for insurance. In that case, insurance will no longer be considered just as a tax saving device.

Add Comments