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IMPORTANCE OF INDIAN INSURANCE INDUSTRY TOWARDS ECONOMIC GROWTHDr. Priya Jain
Asst. Professor, P.M.B. Gujarati Commerce College, Indore 1 INTRODUCTION
Insurance provides security to people from loss and uncertainty. People invest their money by way of insurance for safety purpose, on the other hand, the economy gets money (savings of people) for its developmental projects. Hence insurance plays a vital role in economic development by providing finance to it and by reducing uncertainty of risk in future.
2 GROWTH OF INDIAN INSURANCE SECTOR1
The Indian non-life insurance sector witnessed a growth of 14 percent during 2018 against 17.59 percent growth rate recorded in the previous year. The public-sector insurers exhibited growth of 1.28 percent in 2018-19, over the previous year’s growth rate of 12.58 percent. The private general insurers registered a growth rate of 24.25 percent, against 21.59 percent growth rate during the previous year. 1.3.29 The standalone health insurers registered a growth rate of 36.56 percent against 41.93 percent growth rate during the previous year and the specialized insurers registered a negative growth rate of 10.79 percent as against the growth 10.75 percent during the previous year. I.3.30 The premium underwritten by 28 private sector insurers (including standalone health insurers) in 2018-19 was 92,641 crores as against 73,734 crores in 2017-18.The general insurance industry underwrote total direct premium of 169448 crore in India for the year 2018-19 as against 150662 crores in 2017- 18, registering a growth rate of 12.47percent.
2.1 Objective:
The main objective of this study is to analyze of growth of Indian Insurance Industry and its contribution toward economic growth.
3 CONTRIBUTION OF INDIAN INSURANCE SECTOR TOWARD ECONOMY
Insurance Sector plays a vital role in development of economy of a Nation. The sector provides long term finance for infrastructure development and enhance risk taking ability of businessman and corporate.
1 IRDA Annual Report 2018 - 19
Insurance also provide security to the most precious asset of a nation that is its citizen through health insurance, accidental policies, critical illness plans etc. Let’s examine the role of insurance sector for economic development through following points:
The insurance sector fulfills an important part of investment requirement for infrastructure development which is an important prerequisite of economic development of country. As per Annual Report 2018-19 of IRDA, total investment by life insurance sector was 3,12,1717 crores and non-life insurance sector was 3,14,331 Crore.
Total Investment (in Rs. Crores) by Life and Non-Life insurance sector of Indian
Economy As On 31stMarch 20192 Pattern of
Investment Life Insurance
Sector Non-Life
Insurance Sector Total % of
Total Total % of Total Central Govt.
Securities 1215622 38.94 81755 26.01 Sate govt.
Securities 867521 27.79 48948 15.57 Housing and
loans to state govt.
253187 8.11 31770 10.11
Infrastructure
Investment - - 50070 15.93
Approved Investment
661247 21.18 90162 28.68 Other
Investment 124141 3.98 11626 3.70 Total 3121717 100% 3314331 100%
Insurance sector is continuously contributing to boost direct and indirect employment opportunities. Company’s on roll personnel are called direct employee of the company. TPAs, diagnostic centers, agents, broker etc.
are comes under indirect employment of the insurance companies. The Indian general insurance industry employs around 7 Lakh people directly or indirectly. The general insurance
2 Table 1.53 and 1.50: IRDA Annual Report 2018-19
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industry supports financially togovernment and society at the time of natural catastrophes.
General insurance industry contributes significantly to GDP as a marginal increase in general insurance penetration results in to 39%3growth in GDP which is higher than banking and life insurance.
Insurance provide broader coverage to the firms and its employees hence helpful to improve financial soundness.
If a firm is not insured or do not take Group Mediclaim policy for its employees, then it need to manage large contingency fund every year for emergency. If insurance is there, then only by paying premium the firm can use the spare fund in development and expansion. Hence having insurance allow the firms to take more risk as they are financially sound.
There is no gain without risk, even “the more the willingness to take risk, the more will be produced.” Here insurance play a pivotal role as it provides coverage against several kinds of risk, hence it enhances risk taking ability of entrepreneurs. In developed insurance market entrepreneurs are prepared to take risk and successfully shift the scarce resources from conservative to innovative activities.
Consumption is an important indicator of economic growth of a nation and wellbeing of its citizen. Insurance allow the people of the nation stable consumption throughout their life by offering them lifelong protection against hazardous situations. For example:
Home and other property insurance give relief to people by securing their assets.
Life insurance protects the relatives of policyholders after his death from economic crisis.
Mediclaim insurance/ accidental insurance protect the one when he need it most.
Other line of insurance like fire and liability insurance provide security
3India General Insurance “Vision 2025”: Towards an inclusive, progressive and high performing sector, FICCI Oct. 2013
to infrastructure projects and investment risk.
Insurance enhances risk taking ability of insured as it finances the losses of insured at the time of emergency.
Insurance is the only sector which garners long term savings. If saving of households are not converted into investment, then speed of economic development remains slow. The insurance works as a mobilizer of savings of households, business entities, corporate etc.
For tax planning, the insurance is a most viable instrument.
Health insurance and pension plans provided by the general insurance companies protects the people specially the old age people at the time when they are not in situation to earn even they need money to handle the hazards of life.
There is huge potential in insurance sector as penetration is low that’s why this sector is most favorable place for FDI, which would not only benefit the sector but also the other crucial sectors of the economy like infrastructure.
4 CONCLUSION
Hence, we can say that an economy without insurance cannot be developed fast and remain less stable. Insurance is a way to transfer risk hence on one side it help to companies, firms and entrepreneurs to work with tension free mind set by creating stable operating environment, on the other side it allow the companies/entrepreneurs to pay their whole attention and resources towards their main activities as less capital need to be invest to secure the firms and its employees.
Various social security schemes are provided by states and central government through insurance which protects the workers from economic crisis at the time of accidents, on the other hand it helps to maintain a healthy working population.
REFERENCES
1. www.youarticleliabrary.com.
2. IRDA Annual report 2018-19 and 2017- 18.
3. Bhat, Ramesh (2005) “Insurance Industry in India:
Structure, Performance, and Future Challenges”, Insurance industry in India, Vikalpa, Volume 30, No. 3, July – September 2005.
