Enhancing Competitiveness: The Case of the Indian Life Insurance Industry
Shilpa Rastogi* Runa Sarkar*,** Abstract: Insurance industry contributes to the financial sector of an economy and also provides an important social security net in developing countries. The consistent sub-optimal performance of this sector in India from independence through the 1990s has led to different sets of reforms, with each model adopted focusing on distinct competitive strategies. This study identifies the causes and the objectives with which the sector was reformed in 2000 to conclude that only in the last decade, the hybrid model of privatization with regulation adopted by the Government has yielded positive results and the sector has started to look up. The sector in its present form looks promising for the consumers, the insurers and the nation as a whole. Keywords: life insurance, regulation, competitiveness, Governmental reforms Theme: Enhancing Competitiveness Sub-Theme: Strategies for Enhancing Competitiveness of Firms, Industry Sectors and Country Introduction The insurance industry affects money, capital markets and the real sectors in an economy, making insurance facility necessary to ensure the completeness of a market. It is an industry with strategic importance for any country as it contributes to the financial sector (and hence the GDP) as well as confers social benefits on the society. At the micro-level, an insurance policy protects the buyer against financial loss arising from a specified set of risks at some cost. It thus reduces anxiety and promotes financial stability by providing a much needed social security net, especially in times of crumbling family ties and nuclear households in developing countries. Despite the obvious advantages of insurance, India was one of the least insured countries in the last few decades of the 20th century. In 1999 per capita