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The History of the Insurance Industry

The very first mention
of insurance in history dates back to the Babylonian civilization in 18th
century B.C during the reign of King Hammurabi. The Code of Hammurabi was the
first law of its kind describing the rules that set risk and risk sharing
activities for sea faring traders and money lending merchants. In ancient
Greece, Lebanon and Turkey, the origin of marine trade in 1200 B.C towards
India and major shipping ports of the ancient world led to a rise in the
business of insuring the ships goods for safe voyage against unforeseen sea
conditions and pirates.

In India, ancient texts
such as the Manusmriti, Dharmashastra, and Arthashastra also do mention the
instances of community pooling of risk for the mutual benefit against losses
faced by any individual in the community. The British, only for their own
countrymen in India, formed the Oriental Life Insurance company in 1818 and the
Bombay Assurance Company in 1823, the Madras Equitable Life Insurance Society
in 1829, the Bombay Mutual Life Insurance Society in 1871, and the Oriental
Life Assurance Company in 1874 (Ali &Ahmad, 2007). However, the first
indigenous insurance company to be formed as a result of the Swadeshi movement
in 1905 led to the establishment of the Indian Mercantile Insurance Company
Limited in 1907. ( IRDA/GEN/06/2007)

Formally, the Insurance
Act in 1938 was passed and an insurance department was formed by the Government
of India under the Ministry of Commerce, now Ministry of Finance. This was
further followed by the nationalization of life insurance sector in 1956. There
were over 57 societies, 16 foreign, and 154 Indian insurers which were brought
together to form the Life Insurance Corporation of India. The advent of the
General Insurance Business (Nationalization) Act brought about the formulation
of the National Insurance Company Ltd., the New India Assurance Company Ltd.,
the Oriental Insurance Company Ltd and the United India Insurance Company
Ltd. ( IRDA/GEN/06/2007)

Today, after the 90’s
liberalization of the Indian economy there are many other private insurance
companies apart from the Life Insurance Corporation of India which earlier
achieved complete monopoly in the insurance business. The Malhotra Committee
formulated in 1993 under R.N Malhotra, the Governor of the Reserve Bank of
India at that time. It was this committee which recommended that the financial
sector allow the private players to enter the insurance sector in India.

The Malhotra Committee
report led to the passing of the Insurance Regulatory and Development Authority
(IRDA) Act in 1999. Hence, by law, foreign companies were allowed to have
ownership up to 26 per cent   participation. Presently, apart from the IRDA,
the other regulatory bodies in the insurance sector are the Tariff Advisory
Committee and the Insurance Association of India, Councils and Committees. The
Tariff Advisory committee is a body corporate, which controls and regulates the
rates, advantages, terms and conditions offered by insurers in the general
insurance business whereas the Insurance Association of India is made up of all
insurers and provident societies incorporated or domiciled in India (Desai,


Growth of the Insurance Sector in India

Presently, the insurance
sector in India is seeing a tremendous growth due to rapidly growing insurance
segments, increasing private sector contribution and crop, health, and motor
insurance to drive growth. (IBEF/DEC 2017). According to Mckinsey estimates, the
domestic life insurance industry registered 19.2 per cent  y-o-y growth for new business premium in 2017,
generating a revenue of Rs 1.23 trillion (US$ 20.34 billion) largely due to the
high growth in the individual non single premiums policies, also the non-life
insurance premium market grew at a CAGR of 12.1  per cent  over FY04-16, from US$ 3.4 billion in FY04 to
US$ 13.35 billion in FY16. Gross direct premiums for non-life insurance
industry increased by 18.63 per cent  in
FY181 as intimated by the IBEF, Swiss-Re, IRDA Annual Report (2017).

A lot of reforms have
come which has led to a speedy growth of the insurance sector as mentioned
above. The government based insurance schemes, primarily initiatives such as
the RSBY is a centrally sponsored scheme to provide health insurance to Below
Poverty Line (BPL) families and eleven other defined categories of unorganised
workers, namely building and other construction workers, licensed railway
porters, street vendors, MGNREGA workers, etc. In other government schemes like
the ‘Pradhan Mantri Fasal Bima Yojana’ in 2016-17, the Government of India
released Rs 28386.91 crore (US$ 4.23 billion) in 2016-17 under various crop
insurance schemes. Furthermore, to provide crop insurance to farmers,
Government has launched various schemes like National Agriculture Insurance
Scheme (NAIS), Modified National Agriculture Insurance Scheme (MNAIS) and
Weather-based Crop Insurance Scheme (WBCIS).  

Post liberalization in
the Indian economy, apart from LIC, National Insurance Company Ltd., the New
India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United
India Insurance Company Ltd there has been a mushrooming of numerous private
sector insurance companies both in the general and life insurance domain.
However, in population demographic according to NCAER, the middle class
population in India was 267 million in 2016. Furthermore, the middle class in
India by 2025 would be almost at 547 million citizens. Currently, the most
recent survey by the National Sample Survey (NSS) in 2016 found that 80 per
cent of citizens are not covered by any insurance. Despite the RSBY coming into
practice only 12 per cent of urban and 13 per cent of rural population had
access to insurance cover. The Government sector alone cannot cater to rising
insurance cover need to reduce OOP (out of pocket) expenditure, as evidence by
the NSS 2016 survey findings which state that health care coverage revealed
that 86 per cent of rural and 82 per cent of urban population were not covered
by any government based scheme and as for healthcare expenditure 72 percent
treatment was out of pocket for rural population and 79 per cent
hospitalization, treatment etc. was out of pocket for urban population. Due to
this uninsured space created by the government, private players are the ones
which cater to coverage in India.

Post 2001, after the
formation of the IRDA, the Indian insurance sector has seen a rise in the
number of private players entering the insurance sector as the scope for
insurance penetration is very high in India as most people are not covered by
insurance. There has been a growth of private players in the market of up to 44
private players in 2012. The industry has been spurred by product innovation,
vibrant distribution channels, coupled with targeted publicity and promotional
campaigns by the insurers (Mckinsey, 2017).


Health Insurance in India

According to WHO Health
expenditure database, the health expenditure  as a part of total GDP in India is one of the
lowest amongst the nations in the world with only a spend on 2 per cent
actually directed towards healthcare. Out of this about 1.5 per cent  is covered by Insurance providers. The IRDA in
its 2017 Arcana Report calculated that the total health insurance sector growth
at such a speedy rate can be seen by the rise in premiums from US $ 733 million
from FY 2007 to US $4048 million in FY 2016. In the same report, the gross
premium underwritten for health insurance was US$ 3.15 billion in FY18 and In
FY17 gross direct premium income underwritten under health insurance was US$
4.78 billion.

The fact that despite
pre existing government schemes, there is very low government backed insurance
penetration in India which makes the insurance market in India very viable for
private players to enter. Thus, according to IBEF sources private insurance
coverage is estimated to grow by nearly 15 per cent annually by year 2020. In
2017, the health insurance sector grew at a CAGR of 21 per cent. In July 2016, the
Health Insurance Regulations was brought about by the IRDA which replaced the
regulation which were earlier a part of the Health Insurance Regulations, 2013.
As per the new norms, companies will need to provide better data disclosure,
pilot products, coverage in younger years, etc. 


Rise of Employment Opportunities in Insurance Sector in India

A number of private
insurance companies which have come up such as monoline health insurance
companies like Apollo Munich, Max Bupa, Cigna TTK ,Star health,  Religare and Aditya Birla health Insurance to
name a few, and other (life and general) private insurance companies such as
ICICI Lombard, Edelweiss Tokio, Bajaj Allianz etc. which are some of the well
known insurance company in the corporate space in India.

The private insurance
sector will continue to grow at a speedy space due to the gap created because
the government is only able to cover only a very small percentage of its
citizens. This had not only led to a boom in private players, but also created
employment opportunities for individuals to join the insurance sector.

The Health Insurance
space is characterized by primarily 3 segments which are the B2B space i.e the
Corporate space, the B2C space which involves the retail customer, and the B2G
space which involves liason with Government schemes. The retail space provided
maximum opportunity for employment as distribution is primarily through agents
which drive policy sales. Other channels include bancassurance, digital, and
tele-setup. Distribution in the corporate space is usually done by brokers.


Rationale of the Study

Given the fact that
employment opportunities in the Insurance sector is very high, many
institutions have come up which cater to providing a complete education in
excelling professionally in the field. With the liberalization, privatization and
globalization of the Indian economy, the Indian insurance industry has emerged
as a sunrise industry and a viable career option for many of the working
population. As a result, not only insurance agents but also
marketers and actuaries are in great demand in the insurance sector. As
Insurance Companies deal in
two main areas – Life insurance and General insurance, the liberalization has
led to the opening up of this field by several private companies which have
come up in the field of Life insurance and general insurance.

Due to lack of previous
research which looked at defining a career path progression for managers in the
health insurance sector, a need to cater solely towards health insurance
training and competency development was identified. The health sector in India
in itself is a sunrise industry, insurance penetration is low, and the scope of
catering to the health industry with a specialization in health insurance is
extremely large. 


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