Insurance Sector.Poised for Paradigm Shift in Financial Market

Abstract

insurance is a form of risk management primarily used to hedge against the risk of a continue.~( uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another,·fn'·'. exchange for payment. An insurer is a company selling the insurance; the insured, or policyholder, · is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. The insurance sector has gone through a number of phases by allowing private· companies to solicit insurance and also allowing foreign direct investment of up to 26%, the insurance sector' has been a booming market. The Insurance Regulatory and Development Authority (]RDA) Act, 1999, has allowed a foreign direct investment (FDI) of up to 26 per cent in the insurance sector on automatic route subject to obtaining license from ]RDA. Authorities are now considering an increase of FDJ limit to 49 per cent· through the Insurance Laws Amendment Bill. The insurance sector has a vast potential not only bectiusi~ · incomes are increasing and assets are expanding but also because the volatility in the system is increasing in 1 a sense, we are living in a more risky world. Trade is becoming increasingly global. The total insurance 111bi-ker has grown from US$ 14 billion to US$ 67 billion. Premiums have increased at a compound annual growth .;rate (CA GR) of 25 per cent. Motor insurance forms the largest non life segment with a share. of 43 per cent followed · by Health insurance accounting 21 per cent of the total.