MBA (Finance)III – Semester, Merchant Banking and Financial Services, Unit 5.1
Reforms in Indian Insurance Sector
In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. Following the recommendations of the Malhotra Committee Report, in the year 1999, the Insurance Regulatory and Development
In 1993, the Government set
up a committee under the chairmanship of RN Malhotra, former Governor of RBI,
to propose recommendations for reforms in the insurance sector. The objective
was to complement the reforms initiated in the financial sector. Following the
recommendations of the Malhotra Committee Report, in the year 1999, the
Insurance Regulatory and Development Authority (IRDA) was constituted as an
autonomous body to regulate and develop the insurance industry. The IRDA was
incorporated as a statutory body in April, 2000. The key objectives of the IRDA
include promotion of competition so as to enhance customer satisfaction through
increased consumer choice and lower premium, ensuring the financial security of
the insurance market, to safeguard the interests of insurance policy holders
and to initiate different policy measures to help sustain growth in the Indian
insurance sector.
IRDA has notified 27 Regulations on various issues such as 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. IRDA brought out guidelines on Initial
Public Offers (IPOs).
At present, the number of
Insurance companies operating in India is 24 General insurance companies and 23
Life insurance companies. The growth rate of insurance sector is enormously
increasing day-by-day. The contribution of Insurance services sector in the
country’s GDP is 7%. Insurance sector is strengthening the risk taking ability
of the country and promoting for economic development by providing long- term
funds for infrastructure development.
Conclusion
Thus, Insurance protects the
interest and secure fair treatment to policyholders. Insurance promotes,
monitors and enforce high standards of integrity, financial soundness, and
provides speedy settlement of genuine claims and prevent insurance frauds and
other malpractices and put in place effective grievance redressal machinery.
Insurance builds a reliable management information system to enforce high
standards of financial soundness amongst market players.
