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Insurance today has moved to the center stage of World economy. The growth of insurance worldwide and its influence on the government action provides a clear indication of the relevance and importance of this sector in the Indian economy. With the opening up of the insurance sector, policy holders and investors will be exposed to a wide range of products.

However, in India, insurance is far from being considered with due importance. Actually, in India, nobody takes up insurance unless and until he has had a bad experience. In a liberalised market, the country can gather enormous investment for infrastructure growth. Competition can bring in a healthy insurance industry. The only deterrent in India is that it has only a single digit billion foreign investment and lags behind other developing countries.

A very competitive insurance sector is going to give the society many advantages. There will be some job units as insurance companies might take away agents for smaller sales and may decide to sell it directly. For instance, agents are there for motor insurance. However, once the market opens up, it will be paid through banks, and hence, there wont be a need for these agents. More and more competitors are going to attract the customer by the service that is being offered and so the customer will become the ultimate focal point.

Insurance Act 1938 prescribes fairly rigid guidelines for investment of insurance funds at present. As much as 75% of the investment has to be in government-owned and other securities. If this inflexibility continues, the insurance companies will have very little to earn more on their investment.

LIC has concentrated more on individual assurance over the period and neglected the other sectors, which is clear from the decline in their percentage to 1999-2000 from 1998-1999. This allows upon de-regulation of other companies to leverage their business from other sectors hitherto ignored by the LIC. LIC in fact is using software packages developed in-house in all their 2048 branches. It has also networked their city branches of Mumbai, Delhi, Bangalore and Chennai. The policy holders can tender premium anywhere, and thus, distances are eliminated. Foreign companies will use superior softwares, like Apex, that will give them an edge over the in-house LIC software. The technology will help private insurers in product development and customising products to suit individual needs.

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* Contributed by: -
Mrs. Reshmi Augustine is Research Scholar in Management, Sathyabama Deemed University, Chennai,
Dr. K. S. Chandrasekar is Reader at Institute of Management in Kerala, Thiruvananthpuram.