Life Insurance in India Insurance in India as a sector is the fastest growing in the country since 2000 as the federal government allowed private sector and Foreign Direct Investment up to 26%. Life insurance in India was once upon a time a protected sector i.e. nationalized. This was done by incorporating the LIC, in the year 1956. In those days, in order to nationalize the insurance sector all the companies providing insurance and investment services were absorbed by the LIC. Thus for almost half a century, LIC has enjoyed monopoly status in the Indian insurance market landscape.
After the foreign currency crisis subsided, the government of India instituted a commission known as the RV Malhotra committee. The chief purpose of this committee was to lay down the road map for the ultimate privatization of the Indian insurance sector.
Although the committee has submitted its final draft in the year 1994, it wasn't until 2000 before the relevant legislation could see the light of the day in the parliament. The legislation with the intent to privatize the sector was enacted in 2000 that amended the insurance act of 1938. Also the regulatory body IRDA-Insurance Regulatory and Development Authority was instituted by the IRDA act of 2000. Following this important and watershed legislation IRDA started issuing service license to private players. At present, apart from LIC there are 22 private sector life insurers operating in the Indian market and many more waiting in the pipeline. Almost all of them have been a joint venture between global insurance giants and Indian groups. Another important piece of legislation that followed was the FDI policy in the insurance sector. Prior to 2006, Foreign Direct Investment was not allowed to in this sector. But post 2006, FDI up to a maximum limit of 26% was allowed. IRDA stipulated that FDI in any Indian insurance companies shall be limited to 26% of the total equity issued; the balance must be funded by indigenous promoter entities. Regardless of the above mentioned changes in the policy concerning insurance, LIC the state controlled behemoth still remains the largest player of the sector.
Well, half a century of literal monopoly cannot be wished away by a mere change in policy in one decade. The private sector insurance companies have engineered a new category of products called the ULIPS or Unit Linked Investment Plans. Such products have dual benefits attached to it, it offers both insurance coverage along with the scope for investments or savings according to the wishes of the
customer. ULIP plans are subjected to a lock-in period of a minimum three years in order to prevent the misuse of the tax benefits that are inherent in such plans. Few people cannot resist the temptation to compare ULIPs with mutual funds, but pundits are of a unanimous view that such a comparison would be erroneous. Although there are many policies available in Insurance market which confuses a person, you could find good information here about insurance in India