Life insurance in India

From Wikipedia, the free encyclopedia

Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC.

In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector.

While the committee submitted its report in 1994, it took another six years before the enabling legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The ame year that the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDA -- started issuing licenses to private life insurers.

[edit] List of Life Insurers (as of Sept, 2006)

Apart from Life Insurance Corporation, the public sector life insurer, there are 14 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants.

Life Insurer in Public Sector

1. Life Insurance Corporation of India

Life Insurers in Private Sector

1. ICICI Prudential Life Insurance
2. Bajaj Allianz Life
3. HDFC Standard Life
4. Birla Sunlife
5. SBI Life Insurance
6. Kotak Mahindra Old Mutual Life Insurance
7. Aviva Life Insurance
8. Reliance Life Insurance Company Limited - Formarly known as AMP Sanmar LIC
9. Tata AIG Life
10. Metlife India Life Insurance
11. ING Vysya Life Insurance
12. Max Newyork Life Insurance
13. Sahara Life Insurance - Now they are not into business
14. Shriram Life Insurance
15. Bharti AXA Life Insurance Co Ltd

[edit] Foreign Direct Investment (FDI) Policy in Insurance Sector

As per the current (Mar 06) FDI norms, foreign participation in an Indian insurance company is restricted to 26.0% of its equity / ordinary share capital. The Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding be increased to 49.0%. However, the matter is still under discussions.

All life insurance companies have to comply with the strict regulations laid out by IRDA. Therefore there is risk in going in for private insurance players.

Even if there are 100s of private players in the life insurance industry in India, it is always wise and safe to go with LIC because majority of the private players are interested only in doing quick business i.e., Mutual fund business than doing real Insurance business. Please follow this link to learn more at Settlement on fraud charges

[edit] Commission / Intermediation fees

• The maximum commission limits as per statutory provisions are:

Agency commission for retail life insurance business:

• • • 35 - 40% for 1st year premium if the premium paying term is more than 20 years
    • 25 - 30% for 1st year premium if the premium paying term is more than 15 years
    • 10 - 15% for 1st year premium if the premium paying term is less than 10 years
    • 7.5% - yr 2 and 3rd year and 5% - thereafter for all premium paying terms.

In case of Mutual fund related - Unit linked policies it varies between 1.5% to 60% on the premium paid.

• • Agency commission for retail pension policies:
    • 7.5% for 1st year premium and 2.5% thereafter

• Maximum broker commission - 30%

• Referral fees to banks – Max 55% for regular premium and 10% for single premium. However in any case this fee cannot be more than the agency commission as filed under the product.

• However, the above commission may be further subject to the product wise limits specified by IRDA while approving the product.rtyry