Issues and Challenges of Indian Insurance Industry
Is Privatization on the Right Track The benchmark report of the Malhotra Committee has brought about a revolutionary change of insurance sector by facilitating paradigm shift from a totally regulated one to market oriented one. Insurance industry in India has changed substantially and has responded to a changing environment on the basis of plan recommended by the Malhotra Committee appointed by the Government in 1993. The recommendations of the above committee tabled in Parliament in 1994 and implemented since 2000 have made splendid impact on the country’s life and non-life business of insurance sector.
A sound financial system is a fundamental ingredient for a healthy and vibrant economy. A free and efficient system is conductive to economic growth and its role is to mobilize of savings and deployment of funds in afferent sectors of economy on the basis of priorities. Financial system includes various constituents such as financial institutions, banking system, NBFCs, mutual funds, capital markets, insurance sector and provident funds. The development of well resilient and throng insurance system plays a vital role in sustaining long-term economic growth and efficient resources allocation for financial stability. Insurance as an instrument of socio-economic development is crucial for maintaining security to life and property of persons who are involved in various economic activities for the promotion of prosperity in the country. OECD has observed, “Insurance companies have been able to accumulate large amount of money from across a large proportion of the population. By pooling these savings from many small investors into large accumulations of invisible funds, insurance companies have been able to invest not only in a wider range of investments than individuals would have been able to invest in directly themselves but have also been able to invest in larger scale...