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Evolution of General Insurance in India

What Is General Insurance

Any non-life insurance including medical, automobile, or a certain piece of painting, and nowadays even mobile phone insurances come under the ambit of the General Insurance. Anything that is an asset is insured under the general insurance contracts so that if it is damaged or lost in the future somebody is there to take care of that loss and the policyholder is not unduly affected by the loss/damage caused. Just like Life Insurance, General Insurance is also paid in the form of a premium.

Importance Of General Insurance

  1. It protects assets
  2. The policyholder will have someone to turn to in case of any loss
  3. All the financial assets you hold dear shall be protected
  4. It gives a sense of relief to the policyholders

Evolution Of General Insurance In India- History In Brief

General insurance arrived in India as a part of the East India Company's trade policy. In 1850 with the establishment of the Triton Insurance Company Ltd in Calcutta., the seeds of the General Insurance business in India were sowed. It was the first company of its kind to transact in all kinds of general insurance business in India. Thereafter the major development took place when Indian Mercantile Insurance Ltd was set up in 1907.

After 10 years of attaining independence in 1957, the General Insurance Council, a wing of the Indian association of insurance was created. The council framed a code of conduct to ensure that fair business practices are being carried out in India in the general insurance sector In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. After that, a tariff advisory committee was set up.

The General Insurance Business in India was nationalized by the General Insurance Business (Nationalization) Act in 1972(GIBNA). The Government of India through the nationalization scheme bought 55 shares of the 55 Indian Insurance companies along with the undertakings of 52 insurers carrying on general Insurance business. The National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd., and the United India Insurance Company Ltd. were formed through the amalgamation of 107 insurers. The General Insurance Corporation of India (GICI) was founded in 1971 and began operations on January 1, 1973.

General Insurance Corporation was formed by S.9(1) of the GIBNA and was incorporated on the 22nd of November 1972 under the Companies Act,1956. It was declared a private company limited by shares. GIC was established to supervise, control, and carry out all the work in the general insurance industry. The Government of India transferred all of its general insurance company shares to GIC as soon as it was founded. All of the government's nationalized undertakings were transferred to Indian insurance companies at the same time.
The Insurance Regulatory and Development Authority Act, 1999 (IRDAA) which came into being on the 19th of April in the year 2000 marked the next major milestone in the General Insurance sector in India.

GIBNA and the Insurance Act of 1938 were both amended by the introduction of this Act. The exclusive license of GIC and its subsidiaries to carry on general insurance in India was revoked by an amendment to GIBNA. GIC was renotified as the Indian Reinsurer in November 2000, and its supervisory function over the four subsidiaries was terminated by administrative instruction. It ceased to be a holding company of its subsidiaries on March 21, 2003, when the General Insurance Business (Nationalisation) Amendment Act 2002 (40 of 2002) came into effect.

Types Of General Insurance Policies In India

  1. Motor Insurance:
    In India, if you are driving a vehicle whether a 2-wheeler or 4-wheeler, insurance is a must. You will be legally entitled to drive a vehicle only if your vehicle is insured. There are two types of motor insurance:
    1. Third Party Liability:
      As per the Motor Vehicles Act, it is the minimum requirement you need to have to drive a vehicle. It covers losses faced in a situation wherein your vehicle damages any third party such as public property or any other person's vehicle.
       
    2. Comprehensive Package Policy:
      A Comprehensive Package Policy covers both third-party damages and liabilities and damages/losses caused to you and your vehicle. The losses may arise due to an accident, theft, fire, natural calamities, and others.
       
  2. Health Insurance:
    The health insurances cover all kinds of expenses incurred in the cases of hospitalization which is caused due to an accident or illness. When it comes to health insurance, one can opt for a standalone health policy or a family floater plan that offers coverage for all family members.
     
  3. Home Insurance:
    The Home Insurance policy covers all the losses that can occur to the house and all the contents in it in case of any made or natural causes that lead to its perils. It can broadly be classified into 3 categories:
    1. Structure Insurance- Ensures the structure of the house
    2. Contents Insurance- Covers the contents of the home for eg. Furniture
    3. Comprehensive Insurance- Encompasses both the structure and contents insurances into one policy.
       
  4. Travel Insurance:
    Travel Insurance covers losses while traveling that may be caused due to the loss of luggage, trip cancellation, or flight delay. It also supports cashless hospitalization if you are hospitalized during a trip.
     
  5. Commercial Insurance:
    Businesses, traders, retail shops, and other sorts of business enterprises purchase commercial insurance plans to protect themselves against specific hazards. Commercial insurance comes in a variety of forms e.g. Fire and burglary Insurance, Group Mediclaim Insurance, etc.

Top Companies In The General Insurance Sector In India

  1. Digit General Insurance:
    It is India's 1st digital insurance company and covers a range of life insurance products including 2-wheeler. Car, health, home, travel, and mobile insurances.
     
  2. Liberty General Insurance:
    Starting in 2013, the insurer is one of the best insurance companies in India. Industrial, commercial, and retail insurance solutions are available. Car insurance, two-wheeler insurance, health insurance, and commercial insurance are among the most sought-after insurance products on the market.
     
  3. National General Insurance:
    Starting in the year 1906, the oldest existing general insurance company in India was awarded the best auto insurer in the year 2017.
     
  4. Reliance General Insurance:
    Reliance General Insurance is one of India's most well-known insurance businesses, established at 139 locations with more than 28,900 intermediaries across the country. The insurer's insurance products can be classified as health travel, vehicle, house marine, and so on. The insurer does not stop at insurance and claims; it also encourages customers to maintain a healthy lifestyle. The company believes that everyone should have access to an inexpensive insurance.
     
  5. SBI General Insurance:
    SBI General Insurance was founded in 2010 as a strategic partnership between two financial behemoths, the State Bank of India (SBI) and the Insurance Australia Group (IAG). The insurer is one of India's most well-known insurance businesses, offering a wide range of commercial and retail insurance products at reasonable costs. Health, motor, personal accident, vacation, and home insurance are among the many policies available.

Apart from these, there are other big players in the market such as Kotak Mahindra General Insurance, Edelweiss General Insurance, Bajaj Allianz General Insurance, Oriental General Insurance, United India General Insurance, Tata AIG General Insurance. There are also certain specialized Insurance Companies in India such as the Agricultural Insurance Company of India which is designed to offer specialized insurance policies to suit the needs of the farmers. As well as there is Export Credit Guarantee Corporation of India Limited to cover export credit risks faced by banks, MSMEs, and other financial institutions.

General Insurance In India- Statistics

Life and Non-Life Insurance market penetrations (FY2000-19)
Life insurance penetration in India was around 2.82 percent in 2019, but non-life insurance penetration was far lower at 0.94 percent. In 2019, the industry's overall penetration was 3.76 percent.

Until 2009, when it peaked at 5.2 percent in the industry segment, insurance penetration in the country had been steadily increasing. The 2010 market meltdown in the industry, as well as stronger restrictions put in place to curb the problematic Unit Linked Investment Plans, were two important factors in the precipitous reduction in total penetration (ULIPs).

General Insurance Market Penetration (FY2008-FY2019)
After the financial year 2019, India's insurance penetration rate was 0.9 percent. This appeared to be an improvement over the financial year 2009 when the country's insurance penetration was around 0.6 percent. However, India's insurance penetration is substantially lower than the global average of 2.8 percent. The ratio of insurance premiums to the country's gross domestic product is known as insurance penetration.

Product Wise (FY2019)
In recent years, retail products such as motor insurance and health insurance have dominated India's general insurance business product mix, accounting for roughly 35 percent and 25 percent respectively. In the fiscal year 2019, health insurance accounted for 26% of the whole product mix, while third-party property damage insurance accounted for 22%.

Private Sector Motor Insurance market share (FY2019)
In the financial year 2019, private sector motor insurance across India had a market share of 68 percent, compared to 59 percent in the previous financial year. Compared to public sector insurers in the motor insurance industry, private insurers saw a greater growth and profitability in the country.

Future Of General Insurance Sector In India

In the future customers would be looking for a solution and convenience along with the emotional assurance of being protected if something goes wrong
It is true that in the Insurance market, the shift in the future is going to move to liability insurance and protection of a very different nature. Insurance companies will need to start providing customer-obsessed solutions. Earlier a health insurance would trigger when a person fell ill was good.

The nascent facilities would include tracking their health with the help of wearable devices, providing them access to the best doctors, helping them follow a healthy regime, and also offering them other wellness options. Insurance companies will need to step up from being someone who just comes into contact when a disaster happens to someone who is there as a friend and stays in constant touch throughout the customer's journey.

The insurance companies will be able to evolve their products as per the customer's needs, and it shall have the best future for the insurance company if they improve certain value-added services along with insurance.

Changing the culture from a pure product and transaction-based relationship to a culture of an emotional connect and customer-obsessed solutions is what is going to help insurance companies sustain in the future.

References:
  •  https://economictimes.indiatimes.com/definition/general-insurance

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