Strategies for Sustaining Global Competitiveness in the General Insurance Industry

The opening up of the Indian insurance industry and its consequent privatization and globalization took place belatedly in the year 2000 ten years after liberalization started in the Indian economy in 1991. But even after a decade we have not been able to achieve much and make any headway in general insurance to sustain global competitiveness. The government wanted competition in insurance, both life and general, nationally in the interest of the Indian economy. It was looking out to the areas requiring immediate growth like infrastructure. It wanted foreign companies to enter and make joint ventures with Indian insurance companies. But FDI has been restricted to a meager 26%. The minimum paid-up capital requirement is Rs.100 crores. This restricted fly-by-night operators. The regulatory authority, Insurance Regulatory and Development Authority (IRDA) was formed to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.

But if we look back at the decade gone by we will see that the general insurance industry has not grown the way it should have. On the one hand, the government and the policy makers wanted competition, development, growth and a level playing field in the insurance sector. This is extremely essential for growth of the liberalized economy of the country. On the other, they had the fear that insurance premium which is quite substantial post-2000, would move out of the country. Hence, they wanted to have a cautious approach of opening up for foreign participation in this sector. Political forces particularly the leftist parties have played a very big role in this and have succeeded, most unfortunately, in keeping India stuck. In a coalition government at the centre the leftists had to be wooed to get their support in running the government. Till this day they have opposed LPG (liberalization, privatization and globalization) not only in insurance but other areas as well like multi-brand retail where India needs foreign technology and huge capital to help us compete with China.

I am writing a research paper which will analyze where the general insurance sector has gone wrong in India, what are all the wrong decisions the government has taken over the last decade and what it needs to do make the Indian general insurance industry globally competitive. This paper will look at the main reasons which have affected the growth of general insurance in our country.