An Analysis of the Evolution of Insurance in India

Abstract

India had the nineteenth largest insurance market in the world in 2003. Strong economic growth in the last decade combined with a population of over one billion makes it one of the potentially largest markets in the future. Insurance in India has gone through two radical transformations. Before 1956, insurance was private with minimal government intervention. In 1956, life insurance was nationalized and a monopoly was created. In 1972, general insurance was nationalized as well.255 But, unlike life insurance, a different structure was created for the industry. One holding company was formed with four subsidiaries. As a part of the general opening up of the economy after 1992, a government-appointed committee recommended that private companies should be allowed to operate. It took six years to implement the recommendation. The private sector was allowed into the insurance business in 2000. However, foreign ownership was restricted. No more than 26 percent of any company can be foreign-owned.