CHAPTER 6: SUGGESTIONS AND CONCLUSION.
Indian economy is developing at a quick pace. The entry of new private players in the
liberalised insurance sector has unlocked new roads and huge job opportunities in the nation.
Insurance sector modification speaks to a persistent procedure planned for enhancing the
qualities and opportunities of insurance industry and carrying them to reach the level of
universal international standards. The difficulties confronting the insurance sector are
gigantic yet not inconceivable. Each challenge can be regarded by the insurance players as
allowing a chance to them. The penchant to spend on insurance for the most part relies upon
dispensable income and savings for life insurance and the earnings and risks for general
insurance. The insurance sector grows and develops when the economy grows and in this
regard the government must take the approach to build the employment infrastructure which
is utmost necessary to increase the income levels of the insurance clients.
Another major issue with the Indian insurance sector is the absence of insurance
consciousness among most of the masses. Insurance awareness is an absolute necessity and a
need for the public in our nation. Every single individual should know the significance and
the ensuing advantages of life insurance, and the risk associated with it in case of general
insurance. To accomplish higher levels of penetration and spread of insurance among bigger
fragments of population, the insurance company should put the rural and semi-urban
communities on their forefront instead of the urban or the higher strata of the public.
Some of the major suggestions concluded from the study are as follows:
1. Balanced Regulation with Public Interest Focus
The IRDAI must maintain a regulatory balance that fosters market growth while prioritising the
social function of insurance. Mandatory inclusion policies and robust grievance redressal
mechanisms should be strengthened153.
2. Strengthening Public Sector Insurers
Public insurers, particularly LIC, must be given financial and administrative autonomy to remain
viable competitors without losing their social mandate. The government should resist complete
disinvestment of strategic insurers^12^.
3. Enhancing Rural and Social Insurance
Targeted enforcement of rural sector obligations under the IRDAI (Obligations of Insurers to
Rural or Social Sectors) Regulations^13^, and expansion of schemes like PMJJBY, PMSBY, and
Ayushman Bharat, are vital to inclusive growth^14^.
4. Legal and Regulatory Modernisation
Legislative clarity is needed on emerging issues like digital-only insurers, ESG compliance, and
cross-border mergers. Judicial interpretations must uphold the principle of utmost good faith and
equitable treatment^15^.
5. Data Protection and Cybersecurity
With growing reliance on digital platforms, it is crucial for IRDAI and legislators to integrate
Personal Data Protection norms into insurance-specific laws^16^. The proposed Digital Personal
Data Protection Act must align with sectoral regulations^17^.
6. Insurance Literacy and Public Awareness
Both private and public insurers should collaborate with the government to launch insurance
literacy campaigns, focusing on Tier-II, Tier-III cities, and rural areas. This will empower
consumers and foster trust in the privatised framework^18^.
7.The foremost formula to increase the insurance penetration and density in India is to increase
the awareness about the need for and importance of insurance among the general masses.
1. Non-governmental organisations (NGO’s) and Self-Help Group (SHG) should come
together and approach the individuals in rural areas about the insurance scheme and
make them understand the concealed conditions of the policies, which if not
understood properly may destruction with the hard-earned money of the insured.
2. The number of consumer redressal forums at the local level should be expanded and
appropriate staff strength should be encouraged to work efficiently and facilitate prompt
disposal of cases.
3. There should be proper regulations for censuring intermediaries and extreme
punishment for any such mal-practices or frauds. There should be extreme
disciplinary acts for faulting insurance agents/brokers/companies for selling
inadequate policies by distorting or misrepresenting the facts from the policyholders.
4. IRDA must implement strict rules for failing to provide maturity claims within time
and must impose fine in case of such failure. There must be provision mentioned
clearly in the proposal in case of death or disability claim so that the policy holder or
their representative does not face any problem in case of claim.
5. The policy maker of IRDA should study and take suggestions from the developed
insurance market of other country as India’s insurance market is underdeveloped and
need to be improved for better economy and growth.
6. IRDA must also appoint a certain committee to keep an eye on the insurance agents
and brokers, so that they are not involved in any fraudulent activities.
7. The public insurance companies in both the sectors, i.e. life and general insurers, must
try to surge theirs business by issuing more policies to regain their declining market
position.
8. Both the private and public insurance sector must keep a check on their operating
expenses, which is increasing at an alarming rate and must be controlled as it is not
good for the company in long run and it may turn the company into a loss-making
company soon.
9. India being a vast country with above 65% people living in rural or semi-urban areas
and more than 35% people living below poverty line, with annual earnings of less
than Rs 27000. Hence, the insurance companies, especially the life insurance
companies, must make some policy scheme for such people so that these sections of
people can also avail themselves of the benefits of insurance.
CONCLUSION
Key Conclusions:
1. Legal and Regulatory Evolution
The liberalisation initiated through the Insurance Regulatory and Development Authority Act,
1999, and subsequent amendments to the Insurance Act, 1938, laid the legal groundwork for
private and foreign participation in insurance^1^. However, uniform enforcement and
comprehensive coverage, especially for vulnerable sections, remain concerns^2^.
2. Increased Efficiency and Competition
Private players introduced customer-focused models, diversified products, and digital innovations,
thereby improving service delivery and operational transparency^3^. This has fostered healthy
competition and driven public insurers to adopt more efficient practices.
3. LIC’s Transformation and IPO
The listing of Life Insurance Corporation of India in 2022 was a landmark reform, enhancing
financial transparency and investor participation^4^. However, it has also raised questions about
the dilution of its traditional role as a social insurer^5^.
4. Social Inclusion vs Commercialisation
Despite growth, the penetration of insurance remains low in rural and economically weaker
sections^6^. Private insurers are largely driven by profitability, leading to a skewed focus on
urban and high-income segments.
5. FDI and Foreign Participation
Raising the Foreign Direct Investment (FDI) limit to 74% in 2021 attracted global capital and
expertise^7^. However, this move also necessitates stringent legal safeguards to ensure that
foreign control does not compromise national interest and policyholder protection^8^.
6. Impact of Digitalisation
The sector has embraced digital transformation, particularly post-COVID-19, with the rise of
InsurTech firms and online distribution platforms^9^. This has improved efficiency but also
introduces legal concerns around data privacy, cybersecurity, and regulatory oversight^10^.
7. Privatisation may be defined as the transfer of ownership from state endeavours private
enterprises. It is the liberalisation of the industry that had been reserved previously for public
sector to private sector. Presently, it has become a standard monetary strategy around the globe.
The main advantages of privatisation is that it reduces the financial burden of the government
and increases competition. It strengthen the economic growth and development of the country.
But there are certain disadvantages of privatisation too. Some financial experts contend that
some service sectors like health care, education utilities and law enforcement must remain in
the hands of public sector to ensure more reduces the size of government machinery and leads
to rapid economic development within a short span of time. 152 The government of India after
many debates and recommendations of the committee picked a blended form of economy i.e. a
mixed economy with both public and private sector operating simultaneously. Privatisation has
proved to be valuable to the Indian economy and studies suggest more privatisation in other
sectors like railways is required in our country for healthy growth and success of our economy.
We know that law is not fixed, it is dynamic in nature and it should be changed with the
changing need of time. Revision or amendment is a mode to alter the current law in
consonance with the evolving situation.
152
S. Jayadas, Privatisation of Service Sector in India- A SWOT Analysis, IJSRD, ISSN:
2321-0613, Vol. 4 Issue 11, 93, 93-96, (2017).
We are presently, in the time of globalisation where every progression of alteration in the
present law not only influences the people of the country but have a profound effect in the
foreign markets too. After the liberalisation of the Indian economy, a stage to open the local
market to the foreign markets and way towards industrialisation was initiated. The
policymaker of the government had the motive to boost the process of liberalisation, but the
main reason of these laws was to promote social security, raising the standard of living and to
boost the economy of the country.
Over the past 100 years, the Indian insurance sector has undergone enormous changes. Initially
it emerged with fully private insurers along with foreign players together. Later on it became a
government monopoly in the year 1956 and 1973 with the nationalisation of both life and
general insurance respectively. The year 1991 is marked as a remarkable day in the history of
Indian economy as the government liberalised the economic structure of the country but
eventually, nothing changed in the framework structure of insurance, it remained monopoly as
before. But with the rapid changes in the financial sector the government has appointed two
committees i.e. The Malhotra Committee and Mukherjee Committee to suggest modification in
the Indian insurance industry. And finally in the year 1999, a new legislation came into effect
with the formation of IRDA which changed the structure of previous insurance market in India.
And finally with the establishment of IRDA the government of India liberalised the age-old
tradition of monopoly regime in insurance industry and elevated the entry limitations for
private insurance players and even allowed private foreign insurance players to enter insurance
market and operate their business in India. But, regarding foreign players IRDA placed certain
restrictions and permitted foreign players only with an upper cap of 26% equity capital and
they must join hands with an Indian company to start their operations in India. Presently, the
foreign investment in the insurance sector has been enhanced to 74%. It is satisfying to note
that the new players have initiated the business with an appropriate and right outlook. There is
generous increment in the total premium collected and profitability of the insurance companies
for both life and general insurance post privatisation. Insurance penetration and density which
are the key indicators of development in the insurance market appears to improve post
privatisation but, its development before was quite negligible. The portion or the market stake
of private insurance players both in respect of life and non-life is improving persistently but the
important fact is that the growth rate of the public sector has also increased and showed
efficient results. Both the sectors have improved as it is only due to the increase in competition,
they redrawn their needs to update and redesign their market with the rapidly changing
financial market.
The last recent coronavirus and its spread throughout the globe has thrown a curve ball for
the insurance sector also. The COVID-19 crisis has given rise to many issues and challenges
for both the public and private insurance companies. The pandemic has pushed the insurance
sector to change the way they operate and rely more on digital technology. According to the
report of PwC titled “COVID-19: Impact of Indian Insurance Industry” stated that the life
insurance and general insurance renewal have been hit by around 30% and 15% respectively.
The report also stated that there have been 30 to 40% increase in health insurance and
awareness for life insurance among the Indian people. The situation post-lockdown will be
very challenging for both public and private insurers, but they must try to overcome it to the
earliest possible and accelerate its’ growth and development trend.
Therefore, we can conclude that development of insurance business is wonderful, and it has
been playing a key role in the growth and development of Indian economic system. Although
the Indian insurance sector has grown tremendously over the last two decades, but there are
many more prospects for its future development and success.
Privatisation has undeniably invigorated India’s insurance sector by infusing it with competition,
innovation, and capital. However, these benefits must not come at the cost of social equity, legal
accountability, or consumer protection. A hybrid model where private growth is regulated through
a rights-based, welfare-oriented legal framework appears to be the most viable path forward. This
dissertation submits that India’s long-term insurance policy must be guided by constitutional
principles of justice, equality, and inclusivity, ensuring that the sector serves not only markets but
people.
Footnotes
1. Insurance Regulatory and Development Authority Act, 1999, No. 41 of 1999.
2. IRDAI Annual Report, 2023-24, Chapter 6: Rural and Social Sector Obligations.
3. KPMG Report on Indian Insurance Sector (2023), p. 22–24.
4. Securities and Exchange Board of India (SEBI) Filing: LIC DRHP, 2022.
5. J. Abraham, “Privatisation of LIC: Legal and Policy Implications,” NUJS Law Review, Vol. 15,
2022.
6. Swiss Re Institute, World Insurance Report, 2024, India Country Report.
7. Government of India, Press Note No. 2 (2021 Series), Department for Promotion of Industry
and Internal Trade (DPIIT).
8. R. Mehta, “Regulating Foreign Participation in Indian Insurance,” Indian Journal of Law and
Economics, Vol. 10, 2022.
9. IRDAI Discussion Paper on "Use of Technology in Insurance", 2023.
10. Data Security Council of India, Cybersecurity in Insurance: Challenges & Recommendations,
2024.
11. IRDAI (Protection of Policyholders’ Interests) Regulations, 2017.
12. Ministry of Finance, Report on Performance of Public Sector Insurers, 2024.
13. IRDAI (Obligations of Insurers to Rural or Social Sectors) Regulations, 2015.
14. National Health Authority, Ayushman Bharat Annual Report 2024.
15. Supreme Court of India, United India Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera,
(2008) 10 SCC 404.
16. IRDAI Circular on Cybersecurity Guidelines, 2022.
17. The Digital Personal Data Protection Act, 2023 (Act No. 15 of 2023).
18. RBI-IRDAI Joint Task Force Report on Financial Literacy, 2023.
---
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