INSURANCE IN INDIA - Economics, UPSC, IAS UPSC Notes | EduRev

Economy and Indian Economy (Prelims) by Shahid Ali

UPSC : INSURANCE IN INDIA - Economics, UPSC, IAS UPSC Notes | EduRev

The document INSURANCE IN INDIA - Economics, UPSC, IAS UPSC Notes | EduRev is a part of the UPSC Course Economy and Indian Economy (Prelims) by Shahid Ali.
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INSURANCE IN INDIA 

Overview

  1. The first insurance company in India was the Oriental Life Insurance Company, founded in Calcutta 1818. However, it is now defunct
  2. The first Indian insurance company was the Bombay Mutual Life Assurance Society, founded 1870
  3. The oldest existing insurance company is the National Insurance Company, founded 1906 
  4. Insurance was nationalised in 1956 and then opened up to private sector in 1999.
  5. Currently the government allows 26% FDI in the insurance sector
  6. The largest life insurance company in India is the Life Insurance Corporation
  7. Insurance falls under the purview of the Department of Financial Services, Ministry of Finance 
  8. IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

Nationalisation of insurance 

  1. Life insurance in India was nationalised by the Life Insurance Corporation Act 1956
  2. All 245 life-insurance companies in India at the time were merged to form the Life Insurance Corporation (LIC).
  3. The General Insurance Business Act 1972 nationalised general insurance companies
  4. The existing 100 general insurance companies were amalgamated into the General Insurance Corporation of India (GIC).

GOVERNMENT BODIES IN INSURANCE 

All government bodies in insurance function under the Ministry of Finance unless otherwise noted

  1. Life Insurance Corporation of India (LIC) 
  • Established on Sept 1, 1956.
  • Head office: Mumbai; Zonal offices : 7 (Mumbai, Kolkata, Delhi, Chennai, Kanpur, Hyderabad and Bhopal)
  • The LIC is the largest life insurance company in India and also the nation’s largest investor 
  • It funds close to 25% of the government’s expenses
  • The LIC owns the following subsidiaries
  1. Life Insurance Corporation of India International: provides USD denominated policies to NRIs
  2. LIC Nepal
  3. LIC Lanka
  4. LIC Housing Finance 

 

2. General Insurance Corporation (GIC) of India

 

  1. Established 1972, headquarters Mumbai
  2. The GIC is a holding company for four subsidiary companies 
  3.  Oriental Insurance Company Ltd (New Delhi) O New India Assurance Company Ltd (Mumbai) O National Insurance Corporation Ltd (Kolkata)
  4. United India Insurance Company Ltd (Chennai)
  5. The GIC is the sole re-insurance company in India 
  6. The GIC covers insurance for the entire spectrum of the economy from shoes to aircraft, from agricultural wells to oil wells, from chemical manufactures to satellite launches etc

Reforms in Insurance Sector in India

 

  1. Insurance sector constitutes an important segment of financial market in India and plays a predominant role in the formation of capital in the country. The reforms in the insurance sector started with the enactment of Insurance Regulatory and Development Authority Act, 1999. The Act paved-the way for the entry of private insurance companies into the insurance market and also constitution of Insurance Regulatory and Development Authority.

Insurance Regulatory and Development Authority (IRDA)

 

  1. Established 2000, headquarters Hyderabad
  2. The IRDA was set up to protect the interests of policy holders, and to regulate the growth of the insurance industry
  3. Some of the functions of the Authority include
  4. Regulate investment of funds by insurance companies
  5. Regulate maintenance of margin of solvency
  6. Adjudicate disputes between insurers and intermediaries

Agriculture Insurance Company of India Limited (AICIL)

 

  1. A separate organization for Agriculture Insurance called Agriculture Insurance Company of India Ltd.’ has been incorporated under the Companies Act, 1956 on Dec 20, 2002 with the capital participation from General Insurance Corporation of India (GIC), four public sector general insurance companies viz.,
  2. National Insurance Company Ltd.,
  3. New India Assurance Company Ltd.,
  4. Oriental Insurance Company Ltd., and
  5. United India Insurance Company Ltd. and NABARD.
  6. The promoter’s subscription to the paid-up capital is 35 percent by GIC, 30 percent by NABARD and 8.75 percent each by the four public sector general insurance companies. The authorized capital of the new organization is  1,5000 crore, while the initial paid-up capital is  200 crore.
  7. While the new company would underwrite crop insurance to begin with, it will, in due course, cover other allied rural/agricultural risks also. National Agriculture Insurance Scheme (NAIS), which was being implemented by the General Insurance Corporation of India (GIC), has since been transferred to the new company named Agricultural Insurance Company of India Ltd. (AICIL).
  8. The AIC is under administrative control of Ministry of Finance, but under operative control of Ministry of Agriculture

  9. The AIC offers area based and weather crop insurance schemes to farmers 

  10. It is one of the largest agriculture insurance companies in the world

 

India Insurance FDI Bill

 

  1. The government has decided to amend the Insurance Act to raise the ceiling on Foreign Direct Investment (FDI) in the insurance sector to 49% from 26%.
  2. Apart from the Insurance Act of 1938, the government also plans to amend the Life Insurance Corporation of India Act of 1956, the General Insurance Business Nationalization Act of 1972 and the Insurance Regulatory and Development Authority Act of 1999. Since FDI ceiling is part of the Insurance Act, the Act will have to be amended to allow foreign insurers to hold higher stakes in ventures in India.
  3. The LIC Act would be amended to align the minimum paid-up capital required for LIC with that of private sector companies, which NEED to have a minimum of 100 crore equity capital. LIC currently has a paid-up equity capital of just 5 crore.

POLICIES AND PROGRAMMES

       Social Security Scheme

  1. A Social Security Fund (SSF) was set up in 1988-89 for providing social security through group insurance schemes to the weaker sections of society
  2. The SSF is administered by the LIC 
  3. The SSF provides up to Rs 5000 on death from natural causes and Rs 25,000 upon death/disability due to accident
  4. IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

Janashree Bima Yojana (JBY) 

  1. The Janashree Bima Yojana was launched in 2000
  2. The JBY is a group insurance scheme. The minimum membership of the group should be 25 persons
  3. The JBY is administered by the LIC 
  4. The JBY provides for insurance protection to rural and urban poor. The scheme covers BPL people and above poverty line people who belong to certain identified occupational groups
  5. The scheme provides for cover of Rs 20,000 on natural death. The scheme also provides pension of Rs 200
  6. IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

Aam Aadmi Bima Yojana (AABY) 

  1. Launched in 2007
  2. Provides insurance to the head of the family of rural landless households 
  3. Covers natural death and accidental death/disability
  4. The scheme also provides additional benefit of scholarships for max two children between 9th and 12th standards
  5. Administered by the LIC 
  6. IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

Universal Health Insurance Scheme (UHIS) 

  1. The UHIS is meant to improve access of health care to poor families
  2. Scheme provides for reimbursement of medical expenses, death and compensation due to loss of earning capacity
  3. The UHIS targets only BPL families 
  4. IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

National Agriculture Insurance Scheme (NAIS) 

  1. Launched in 1999
  2. Protects farmers against losses due to natural calamities such as flood, drought, pestilence etc 
  3. Scheme is implemented by the Agriculture Insurance Company (AIC) 
  4. The Scheme is available to all farmers irrespective of the size of their land holdings 
  5. The Scheme covers all food crops and oil seeds. It also covers some commercial and horticultural crops
  6. The scheme has until now covered more than 1.3 million farmers and 211 million hectares of land IAS, IAS Exam, IAS Study Material, UPSC, UPSC Question Papers, India, Civil Service, General Studies, Free

Pilot Weather Based Crop Insurance Scheme (WBCIS)

  1. Launched in 2007, on a pilot basis
  2. The WBCIS aims to cover farmers against anticipated crop failure due to adverse weather conditions 
  3. The scheme is based on the fact that weather parameters can affect crop yield even when the farmer has taken all care to ensure a good harvest.
  4. The payouts are based on historical data that determine weather thresholds/triggers beyond which crop losses are expected
  5. The WBCIS is implemented by the AIC 
  6. The scheme is currently being implemented on 30 major crops including horticultural crops
  7. Currently the scheme covers more than 110,000 farmers and 1.4 million hectares of land
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