National Insurance Awareness Day is annually observed on 28 June to raise awareness about the importance of insurance, a financial product, in protecting individuals, families, and businesses from financial risks.
- The day aims to educate people about different types of insurance policies and their benefits.
- The day also encourages everyone to review their current insurance policies and assess if they need any changes or additional coverage.
What is Insurance?
i.Insurance is a legal agreement between the insurer (insurance company) and the insured (individual), governed by specific terms and conditions.
- The primary purpose of insurance is to provide financial security against potential losses or damages.
ii.Insurance policies cover predefined events or risks, that are clearly outlined in the policy document.
iii.Under an insurance policy, the insured needs to pay a regular amount of premiums to the insurer to maintain the insurance coverage.
Evolution of Insurance in India:
i.In India, the emergence of Insurance was witnessed with the establishment of the Oriental Life Insurance Company in 1818, in Calcutta (now Kolkata, West Bengal).
ii.In 1914, the Government of India (GoI) started publishing insurance company returns.
iii.The Indian Life Assurance Companies Act of 1912 was the 1st statutory measure to regulate life business.
Nationalisation and Reforms:
i.In 1950, the Insurance Amendment Act abolished Principal Agencies, increased competition, and led to allegations of unfair practices.
ii.In 1956, an ordinance was issued, nationalising the Life Insurance sector, and the Life Insurance Corporation (LIC) was established, absorbing 245 insurers and holding monopoly until the late 1990s.
iii.The LIC of India was formed by the Life Insurance Corporation Act of 1956, with a capital contribution of Rs. 5 crore from the GoI.
iv.According to the Insurance Regulatory and Development Authority of India (IRDAI):
- The minimum equity capital requirement to set up a Life, General, or Health Insurance Company in India is Rs 100 crore;
- In the case of a Reinsurance company, the requirement is a minimum of Rs 200 crore;
Insurance Penetration in India:
i.According to the IRDAI, in the financial year 2023, India‘s insurance premium penetration accounted for 4% of the Gross Domestic Product (GDP), lower than the global average of 6.8%.
- The penetration of life insurance made up 3% of the total GDP in FY 2023 and non-life insurance comprised 1% of the GDP in FY 2023.
ii.Insurance penetration is one of the parameters used to assess the level of development of the insurance sector in a country.
- It is measured as a percentage of total premiums collected to the country’s GDP.
About the Insurance Regulatory and Development Authority of India (IRDAI):
The IRDA was constituted as an autonomous body to regulate and develop the insurance industry, following the recommendations of the Malhotra Committee report, in 1999.
The IRDA was incorporated as a statutory body in April 2000.
Chairman– Debasish Panda
Headquarters– Hyderabad, Telangana
