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Business Services — Business Studies STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceBusiness StudiesBusiness Services6 Marks
Question
Write a short note on Indian insurance sector.
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Answer

The health of the insurance sector reflects a country's economy. This sector not only generates long term funds for infrastructure development, but also increases a country's risk taking capacity. India's economic growth since the turn of the century is viewed as a significant development in the global economy. This view is helped in no small part by a booming insurance industry.
The future of the Indian insurance sector looks bright. The sector which stood at a strong US $ 72 billion in 2012 has the potential to grow to US $ 280 billion by 2020. This growth is driven by India's favourable regulatory environment which guarantees stability and fair play. This environment has given rise to an insurance market which encourages foreign investors to tap into the sector's massive potential.
Ever since the Indian government liberalised the insurance sector in 2000 and opened the doors for private participation, the sector has become stronger. The resultant competition has provided the consumer with a never-before-seen range of products and providers, and also enhanced service levels markedly.
Consistent growth in the insurance sector depends on a few factors. Some of these are:
  1. Effective distribution channels: The efficiency and cost of the various distribution strategies used by companies are significant to their success in the insurance business. This particularly holds true for the retail business.
  2. Focus on overall financial inclusion: As time evolves, so must the approach of the insurance sector in India. The objective of the insurance sector should ideally be to offer a broader range of activities to a wider populace.
  3. Consumer needs and preferences: The growth of India's insurance industry can be attributed to product innovation, dynamic distribution channels, and vibrant publicity and promotional campaigns run by insurance companies. Benefits attached to the products and the manner in which they are delivered (through various marketing tie-ups) have helped bring customers and insurance companies closer to each other and made the latter more relevant.
  4. Health Insurance is an up-and-coming segment in this sector: Currently, it caters for 10 percent of the overall US$ 30 billion healthcare expenditure in India. Consequently, there is plenty of scope for players in this area.
  5. The life insurance segment contributes about 4 percent to India's gross domestic product (GDP) in terms of total premiums underwritten annually. There are 23 private companies in the segment. The state owned Life Insurance Corporation (LIC) dominates the field, with about 71 percent of the market share, according to Insurance Regulatory and Development Authority (IRDA).

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