Category: Osmania University B.com Notes

The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

• 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
• 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
• 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
• 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are:

• 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.
• 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.
• 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
• 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973.
• 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Insurance sector reforms

In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its future direction.

The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…”

In 1994, the committee submitted the report and some of the key recommendations included:

1) Structure

• Government stake in the insurance Companies to be brought down to 50%.
• Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations.
• All the insurance companies should be given greater freedom to operate.

2) Competition

• Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry.
• No Company should deal in both Life and General Insurance through a single entity.
• Foreign companies may be allowed to enter the industry in collaboration with the domestic companies.
• Postal Life Insurance should be allowed to operate in the rural market.
• Only One State Level Life Insurance Company should be allowed to operate in each state.

3) Regulatory Body

• The Insurance Act should be changed.
• An Insurance Regulatory body should be set up.
• Controller of Insurance (Currently a part from the Finance Ministry) should be made independent.

4) Investments

• Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%.
• GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time).

5) Customer Service

• LIC should pay interest on delays in payments beyond 30 days.
• Insurance companies must be encouraged to set up unit linked pension plans.
• Computerisation of operations and updating of technology to be carried out in the insurance industry The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition.

But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.

Major Policy Changes

Insurance sector has been opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/ corporations. Under the new dispensation Indian insurance companies in private sector were permitted to operate in India with the following conditions:

• Company is formed and registered under the Companies Act, 1956;
• The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company;
• The company’s sole purpose is to carry on life insurance business or general insurance business or reinsurance business.
• The minimum paid up equity capital for life or general insurance business is Rs.100 crores.
• The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores.

The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders’ interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration to both life and non-life insurers. The Authority has its Head Quarter at Hyderabad.

Protection of the interest of policy holders:

IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps:

• IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and non-life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders’ servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim.
• The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims.
• It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public.
• All insurers are required to set up proper grievance redress machinery in their head office and at their other offices.
• The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance contract. 

General Insurance Companies:

Private Sector Companies

• Aditya Birla Health Insurance Co. Ltd.
• Bajaj Allianz General Insurance Co. Ltd.
• Bharti AXA General Insurance Co.Ltd.
• Cholamandalam General Insurance Co. Ltd.
• Future Generali India Insurance Co.Ltd.
• HDFC ERGO General Insurance Co. Ltd.
• ICICI Lombard General Insurance Co. Ltd.
• IFFCO-Tokio General Insurance Co. Ltd.
• Kotak General Insurance Co. Ltd.
• L&T General Insurance Co. Ltd.
• Liberty Videocon General Insurance Co. Ltd.
• Magma HDI General Insurance Co. Ltd.
• Raheja QBE General Insurance Co. Ltd.
• Reliance General Insurance Co. Ltd.
• Royal Sundaram Alliance Insurance Co. Ltd
• SBI General Insurance Co. Ltd.
• Shriram General Insurance Co. Ltd.
• TATA AIG General Insurance Co. Ltd.
• Universal Sompo General Insurance Co.Ltd.

Health Insurance Companies

• Apollo Munich Health Insurance Co.Ltd.
• Star Health Allied Insurance Co. Ltd.
• Max Bupa Health Insurance Co. Ltd.
• Religare Health Insurance Co. Ltd.
• Cigna TTK Health Insurance Co. Ltd.

This collaboration with the foreign markets has made the Insurance Sector in India only grow tremendously with a high current market share. India allowed private companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014. IRDAI states –  Insurance Laws (Amendment) Act, 2015 provides for enhancement of the Foreign Investment Cap in an Indian Insurance Company from 26% to an Explicitly Composite Limit of 49% with the safeguard of Indian Ownership and Control.

Private insurers like HDFC, ICICI and SBI have been some tough competitors for providing life as well as non-life products to the insurance sector in India.

The Future Of Insurance Sector In India

Though LIC continues to dominate the Insurance sector in India, the introduction of the new private insurers will see a vibrant expansion and growth of both life and non-life sectors in 2017. The demands for new insurance policies with pocket-friendly premiums are sky high. Since the domestic economy cannot grow drastically, the insurance sector in India is controlled for a strong growth.

With the increase in income and exponential growth of purchasing power as well as household savings, the insurance sector in India would introduce emerging trends like product innovation, multi-distribution, better claims management and regulatory trends in the Indian market.

The government also strives hard to provide insurance to individuals in a below poverty line by introducing schemes like the

• Pradhan Mantri Suraksha Bima Yojana (PMSBY),
• Rashtriya Swasthya Bima Yojana (RSBY) and
• Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

Introduction of these schemes would help the lower and lower-middle income categories to utilize the new policies with lower premiums in India.

With several regulatory changes in the insurance sector in India, the future looks pretty awesome and promising for the life insurance industry. This would further lead to a change in the way insurers take care of the business and engage proactively with its genuine buyers.

Some demographic factors like the growing insurance awareness of the insurance, retirement planning, growing middle class and young insurable crowd will substantially increase the growth of the Insurance sector in India.

International Insurance Market

Globally, the insurance industry experienced strong premium growth in 2015, at 5.6 percent, whereas growth in 2016 is expected to be noticeably slower, at 4.4 percent. Total premiums are expected to reach €4.6 trillion, up from €4.4 trillion in 2015.

What factors help explain the industry’s performance? The global insurance industry is undergoing turbulent times with the continuing low interest rate environment, a challenging equity market, and tightening regulatory changes, such as the US Department of Labor (DOL) rule and new US tax guidelines. Meanwhile, consumers’ shift to hybrid online and offline research and purchasing has largely concluded in developed markets and is accelerating in developing markets with the spread of mobile phones. These changes, along with the impact of price-comparison websites and other technology developments, plus the race to implement digital processes, are tectonic shifts forcing insurers to adjust their business models.

Mature markets in North America and Western Europe required the deployment of considerable strength to address these trends. With life eroding and P&C flattening, the mature markets have exhibited slower growth rates than insurance in emerging markets, and the figures in our report are beginning to reflect these major fault lines by business segment and geography.

Specifically, preliminary reports at the segment level globally suggest that health had the highest growth rate from 2015 to 2016, at 6 percent followed by P&C at 4.2 percent, while life saw a slowdown in growth of gross written premiums (GWP) from 4.8 percent in 2015 to 3.8 percent in 2016.

At the regional level, EMEA recorded moderate growth in the P&C and health insurance segments, while life is expected to decline. Growth in the Americas region has been characterized by strong progress in health and moderate growth in the P&C segment. Life is expected to be a bit volatile, owing to changes in US regulations, and is projected to end 2016 with a slight decline in the Americas overall. In APAC, on the other hand, the insurance industry grew in all three segments, with health generating double-digit growth.

At the business segment level, preliminary reports revealed some important trends:

• Life: Most regions, except the Americas and Western Europe, saw positive life growth in 2016, but the amount of the increase, as well as the factors responsible, varied by region. In a marked departure from 2015, Asian countries, such as China, Hong Kong (analyzed as a separate entity), and India, achieved the strongest gains. Of all life products, endowments experienced the most growth, mainly driven by emerging Asia and the United States, whereas Unit-linked (UL) products have seen a decrease in the United States and Western Europe. The key profit indicator life return on equity (RoE) rose from 11 percent in 2014 to 11.8 percent in 2015, but is expected to stabilize at the lower level of 10 percent going forward.
• P&C. The global P&C insurance industry has remained stable over the past five years, growing at a steady 4 to 5 percent. It is also expected to grow at 4.2 percent for the year 2016, increasing the size of the global P&C market to €1.39 trillion. At the regional level, although the APAC region accounts for only 23 percent of the total P&C market, it has been the major driver of growth, growing at an average rate of 9 percent per annum (p.a.) since 2013, and is expected to grow even faster in the future. In contrast, the Americas and the EMEA regions, accounting for 49 percent and 29 percent of the global market, respectively, are expected to grow at a scant 2 to 3 percent over the next two years.

Longer term, we believe P&C will see declining if not negative growth, at least in mature markets, due to, for example, safer and fewer cars and more technology for risk prevention in homes and factories.

Global distribution trends vary by product and region. In life insurance, while bancassurance dominates the distribution space in many Asian and European geographies, brokers are more popular in North America. P&C insurance remains, as before, more dominated by agents and brokers, but we see a rapid increase in the popularity of direct distribution modes in many geographies. Analyses of the performance of direct players, in some geographies, also reveal that they are able to outperform their markets. The role of direct will be highly important in mastering the cost reduction challenge, particularly the effects of digital attackers and price-comparison websites. While direct is starting to stagnate in Western Europe, the big change is that all customers are becoming hybrid, implying much greater price transparency hence further cost pressure as well as the need to change the operating model of non-direct to fully multi- or omnichannel. Companies seeking top growth opportunities in the global insurance markets can explore both the fastest-growing markets and the largest developed markets. As the slowing growth rates suggest, however, most carriers will also need to search farther afield. Looking ahead, at the geographic level, Latin America and the Middle East are expected to be the fastest growing regional markets, that is, offering double-digit rates of annual GWP growth. In the APAC region, the top line is expected to grow at a brisk pace with health as its fastest growing segment.

Underwriting is the process of determining whether an insured is an acceptable risk, and if so, at what rate the insured will be accepted. Insurers cannot accept every applicant. An insurer has a responsibility to its current policyholders to make sure that it will be able to meet all the contractual obligations of its existing policies. If the insurance company issues policies on applicants that represent risks that are uninsurable or risks that require premiums higher than the insurer may charge can cover, the insurer’s ability to meet its contractual obligations is jeopardized. On the other hand, a for-profit insurer wants to make money and to increase its number of policyholders. No insurer wants to reject applicants unnecessarily. All these factors must be taken into consideration in the underwriting process. An insurer is also regulated by the states in which it does business. The states expect the insurer to establish reasonable, non-discriminatory standards for accepting insured. Regulation is another important factor in the underwriting process; most of the risks are tariff governed.

It is very important for you to understand the underwriting process to help you avoid needless frustration.

After you apply for life insurance, the company is going to look at different criteria to decide if they are going to accept your application for coverage.

Several of the major factors the underwriter will review are your driving history, prescription history, family health history, usage of alcohol, height and weight and of course any prior medical issues or surgeries.

If you elect to purchase a life insurance policy requiring a free medical exam all the exam results will be reviewed prior to an underwriting decision.

The underwriting process is an essential part of any insurance application.

When an individual applies for insurance coverage, he or she is essentially asking the insurance company to take on the potential risk of having to pay a claim in the future.

In many cases, life insurance claims can be quite high.

Therefore, it is critical to the financial long-term health of the insurance company to not take on too great a risk when taking into consideration an applicant for life insurance coverage.

Underwriting services are provided by some large financial institutions, such as banks, or insurance or investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability arising from such guarantee. An underwriting arrangement may be created in a number of situations including insurance, issues of security in a public offering, and bank lending, among others. The person or institution that agrees to sell a minimum number of securities of the company for commission is called the Underwriter.

The name derives from the Lloyd’s of London insurance market. Financial bankers, who would accept some of the risk on a given venture (historically a sea voyage with associated risks of shipwreck) in exchange for a premium, would literally write their names under the risk information that was written on a Lloyd’s slip created for this purpose.

Underwriting Process

In order for the insurance companies to make profit and charge the appropriate rate for an insured, they undergo the underwriting process. Underwriting is the process in which an insurance company determines if an applicant is eligible for insurance and the rate they should charge if the applicant is eligible. In simpler words, it is a process of risk classification. The purpose of insurance underwriting is to spread risk among a pool of insured in a way that is both profitable for the insurer and fair to the customer. Insurance companies need to make a profit like many other businesses. Therefore, it doesn’t make sense if they sell insurance for everyone who applies for it. They may not want to charge an excessive high rate to the customer and also it is not good for them to charge the same premium to every policyholder. “Underwriting enables the company to weed out certain applicants and to charge the remaining applicants premiums that are commensurate with their level of risk” (Conrad, Clark, Goodwin, Morse & Kane, 2011).

The underwriting process consist of evaluating several sources of an applicant and the use of complex pricing models developed by actuaries that help the insurance companies set prices.

Underwriters use underwriting guidelines based on mortality statistics that are calculated by actuaries. All insurance products involve some degree of underwriting. For life insurance, the underwriter looks at data like your health and medical history as well as lifestyle information like your hobbies and financial ability.

There are broadly two parts to underwriting:

1) Financial underwriting: It helps the underwriter to make sure the amount you’re purchasing is in line with your family’s and your needs.

2) Medical underwriting: Here, the underwriters determine how much of a risk you are to insure by evaluating factors that may affect your mortality.

Step 1: Application Quality Check

Your application is first gone through to make sure the information provided is complete and correct. Therefore, it is important you fill your proposal form carefully and completely. Unless the missing information is related to your medical history, a minor change required in an application does not typically slow down the underwriting process. After this, your application goes into the official underwriting process. Each of the following checks can increase the turnaround time, but it is worth it to get you the right premium price you will need to pay over the policy term.

Step2: Medical Examination

This step involves looking thoroughly at the results of your paramedical exam, conducted only if required for health proof. This medical test is a simple checkup with the doctor recommended by the insurance company. After the medical examination, the results are sent to the underwriter for evaluation. The information used by the underwriter is mainly of three types – basic measurements, your blood test and drug test. Basic measurements include regular metrics like height, weight, blood pressure. Blood test can get a lot of information on potential health risks such as heart disease, stroke, diabetes, and blood-borne illnesses, among others. Finally, a urine test for a full drug panel will alert the underwriter to the use of drugs, smoking and alcohol consumption.

Step 3: Final Application Rating

Once the underwriting process is complete and all your medical and financial background have been checked, you are either made a counter offer suggesting the changes basis you policy evaluation, or you are proudly offered the life insurance policy. Depending upon your acceptance or rejection of the new policy term, your policy is then issued. The whole process can take anywhere between three to eight weeks. After this, all that’s left to be done is to confirm the premium rate, sign the policy to put it in force to keep your family protected.

While not every applicant will require a detailed medical examination, underwriters may sometimes request an inspection report, or independent information on the applicant’s financial situation and lifestyle. The premium that you have to pay for your life insurance policy depends majorly on this evaluation done basis factors like your age, your medical history, gender, lifestyle, and job. However, you must remember that a life insurance policy should not be bought on the basis of lower premiums.

The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India. The agency’s headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.

IRDAI is a 10-member body including the chairman, five full-time and four part-time members appointed by the government of India.

Functions of the Insurance Regulatory and Development Authority Act

The functions of the IRDAI are defined in Section 14 of the IRDAI Act, 1999, and include:

• Issuing, renewing, modifying, withdrawing, suspending or cancelling registrations
• Protecting policyholder interests
• Specifying qualifications, the code of conduct and training for intermediaries and agents
• Specifying the code of conduct for surveyors and loss assessors
• Promoting efficiency in the conduct of insurance businesses
• Promoting and regulating professional organizations connected with the insurance and re-insurance industry
• Levying fees and other charges
• Inspecting and investigating insurers, intermediaries and other relevant organizations
• Regulating rates, advantages, terms and conditions which may be offered by insurers not covered by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938)
• Specifying how books should be kept
• Regulating company investment of funds
• Regulating a margin of solvency
• Adjudicating disputes between insurers and intermediaries or insurance intermediaries
• Supervising the Tariff Advisory Committee
• Specifying the percentage of premium income to finance schemes for promoting and regulating professional organizations
• Specifying the percentage of life- and general-insurance business undertaken in the rural or social sector
• Specifying the form and the manner in which books of accounts shall be maintained, and statement of accounts shall be rendered by insurers and other insurer intermediaries.

Provide license for:

• Life Insurance
  • Term Plans
  • Endowment Policies
  • Unit-linked Insurance Policies
  • Retirement Policies
  • Money-back Policies
• General Insurance
  • Health Insurance Policies
  • Vehicle/Motor Insurance Policies
    • Car insurance
    • Bike Insurance
  • Property Insurance Policies
  • Travel Insurance Plans
  • Gadget Insurance Plans

Structure of the Insurance Regulatory and Development Authority Act

Section 4 of the IRDAI Act 1999 specifies the authority’s composition. It is a ten-member body consisting of a chairman, five full-time and four part-time members appointed by the government of India. At present (1 Sept, 2018), the authority is chaired by Dr. Subhash C. Khuntia and its full-time members are Mrs T.L.Alamelu, K.Ganesh, Pournima Gupte, Praveen Kutumbe and Sujay Banarji.

History of the Insurance Regulatory and Development Authority Act

In India insurance was mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthashastra), which examined the pooling of resources for redistribution after fire, floods, epidemics and famine. The life-insurance business began in 1818 with the establishment of the Oriental Life Insurance Company in Calcutta; the company failed in 1834. In 1829, Madras Equitable began conducting life-insurance business in the Madras Presidency. The British Insurance Act was enacted in 1870, and Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were founded in the Bombay Presidency. The era was dominated by British companies.

In 1914, the government of India began publishing insurance-company returns. The Indian Life Assurance Companies Act, 1912 was the first statute regulating life insurance. In 1928 the Indian Insurance Companies Act was enacted to enable the government to collect statistical information about life- and non-life-insurance business conducted in India by Indian and foreign insurers, including provident insurance societies. In 1938 the legislation was consolidated and amended by the Insurance Act, 1938, with comprehensive provisions to control the activities of insurers.

The Insurance Amendment Act of 1950 abolished principal agencies, but the level of competition was high and there were allegations of unfair trade practices. The Government of India decided to nationalise the insurance industry.

An ordinance was issued on 19 January 1956, nationalising the life-insurance sector, and the Life Insurance Corporation was established that year. The LIC absorbed 154 Indian and 16 non-Indian insurers and 75 provident societies. The LIC had a monopoly until the late 1990s, when the insurance industry was reopened to the private sector.

General insurance in India began during the Industrial Revolution in the West and the growth of sea-faring commerce during the 17th century. It arrived as a legacy of British occupation, with its roots in the 1850 establishment of the Triton Insurance Company in Calcutta. In 1907 the Indian Mercantile Insurance was established, the first company to underwrite all classes of general insurance. In 1957 the General Insurance Council (a wing of the Insurance Association of India) was formed, framing a code of conduct for fairness and sound business practice.

Eleven years later, the Insurance Act was amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee was established. In 1972, with the passage of the General Insurance Business (Nationalization) Act, the insurance industry was nationalized on 1 January 1973. One hundred seven insurers were amalgamated and grouped into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. The General Insurance Corporation of India was incorporated in 1971, effective on 1 January 1973.

The re-opening of the insurance sector began during the early 1990s. In 1993, the government set up a committee chaired by former Reserve Bank of India governor R. N. Malhotra to propose recommendations for insurance reform complementing those initiated in the financial sector. The committee submitted its report in 1994, recommending that the private sector be permitted to enter the insurance industry. Foreign companies should enter by floating Indian companies, preferably as joint ventures with Indian partners.

Following the recommendations of the Malhotra Committee, in 1999 the Insurance Regulatory and Development Authority (IRDA) was constituted to regulate and develop the insurance industry and was incorporated in April 2000. Objectives of the IRDA include promoting competition to enhance customer satisfaction with increased consumer choice and lower premiums while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with an invitation for registration applications; foreign companies were allowed ownership up to 26 percent. The authority, with the power to frame regulations under Section 114A of the Insurance Act, 1938, has framed regulations ranging from company registrations to the protection of policyholder interests since 2000.

In December 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and the GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from the GIC in July 2002. There are 28 general insurance companies, including the Export Credit Guarantee Corporation of India and the Agriculture Insurance Corporation of India, and 24 life-insurance companies operating in the country. With banking services, insurance services add about seven percent to India’s GDP.

In 2013 the IRDAI attempted to raise the foreign direct investment (FDI) limit in the insurance sector to 49 percent from its current 26 percent. The FDI limit in the insurance sector was raised to 100 percent according to the budget 2019.