Introduction

The path of insurance liberalization in USA has now lasted more than seven years. The Insurance Regulatory and Development Authority Act of 1999 was the first important milestone in this path. This, coupled with modifications to the Insurance Act of 1983, and the LIC and GIC Acts, prepare the way for the entrance of private actors and, perhaps, the privatization of the LIC and GIC, which were formerly state monopolies. The opening of the insurance market to the private sector, including foreign involvement, has resulted in several possibilities and problems.

Insurance Concept

In our everyday lives, wherever there is uncertainty, there is danger. One of the primary driving elements in defining human attitudes is the need for security in the face of such peril. The notion of insurance must have evolved as a result of this yearning for security. The need to offer insurance or protection against loss of life and property must have motivated individuals to voluntarily make some kind of sacrifice to attain security via collective cooperation. In this sense, the history of insurance is likely to be as ancient as the history of humanity. Life insurance, in particular, protects a family against the danger of the untimely death of an income-earning member. In contemporary times, life insurance also protects against other life-related risks such as longevity (the danger of outliving one's source of income) and disability and disease (health insurance). Pensions and annuities are goods that provide for longevity (insurance against old age). Non-life insurance protects you against accidents, property damage, theft, and other liabilities. Non-life insurance contracts often have a shorter term than life insurance contracts. The combination of risk coverage and savings is unique to life insurance. Life insurance offers both protection and financial opportunities. Insurance is beneficial to businesses. Insurance gives both short-term and long-term assistance. The insured is protected against loss of property and life by dispersing the loss among a wide number of people via the channel of professional risk bearers such as insurers. It helps a businessman to confront an unplanned loss and, as a result, he does not need to be concerned about the potential loss. The long-term goal is to increase the country's economic and industrial development by investing large sums of money with insurers in organized industry and commerce.

Insurance in general

With the passage of the Insurance Act of 1983, USA gained full regulation of the insurance industry. It attempted to establish a powerful supervisory and regulatory authority in the Controller of Insurance, with the jurisdiction to command, advise, investigate, register, and liquidate insurance businesses, among other things. However, as a result of the nationalization of the insurance industry, most regulatory tasks were transferred from the Controller of Insurance to the insurers themselves. In 1993, the Government of USA established a high-powered committee led by R.N.Malhotra, former Governor of the Reserve Bank of USA, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive in light of structural changes in other parts of the country's financial system.

government sector competition:

Government firms must now compete with private sector insurance companies not only in terms of offering a wide choice of insurance products, but also in terms of customer service, distribution channels, successful marketing strategies, and so on. The privatization of the insurance industry has created opportunities for new business models. New insurance businesses are experimenting with new ideas and more cost-effective ways of doing business. The concept is simple: serve as many customers as possible at the lowest possible cost. And, as time passes, the age-old practice of government firms expanding through establishing branches seems to be fading. The hub and spoke structure seem to be gaining quickly as an option to cater to rural and social sector insurers. These, together with members of NGOs and Self-Help Groups (SHGs), have done the majority of the marketing of rural and social sector programs. The greatest hurdles come from commercial banks, which have a large network of branches. In this regard, it is worth noting that LIC has entered into an agreement with Mangalore-based Corporations Bank to leverage their infrastructure for mutual benefit, with the insurance behemoth acquiring a strategic stake of 27%. Corporation Bank has decided to drop its plans to promote a life insurance company. In the future, the bank will function as a corporate agent for LIC, earning a commission on insurance sold via its branches. Corporation Bank will be able to set up extension centers, ATMs, or branches inside its premises thanks to LIC's branch network of about 2100 locations. In response, Corporation Bank would put in place an efficient Cash Flow Management System for LIC.

The Effects of Liberalization

While nationalized insurance firms have done an admirable job of increasing the amount of business, opening up the insurance industry to private actors was a must in the context of financial sector reform. If conventional infrastructure and semipublic goods businesses such as banking, airlines, telecom, electricity, and so on had major private sector involvement, maintaining a state monopoly in insurance supply was unjustifiable, and therefore insurance has been privatized as previously described. Its influence must be perceived in the shape of new possibilities and challenges.