Global Financial Crisis and Life Insurance Sector in India – A Comparative Study of LIC with Private Sector

Abstract

Life insurance is a fast growing service sector in India during the last eleven years after the entrance of private sector in this field. The low penetration and low insurance density has made this sector as a fast developing sector in India. The insurance sector contributes 5.2 per cent of GDP in 2011. The global meltdown and   consequent economic recession in developed economies have clearly been major   factor in India’s economic slowdown. The saving nature of the Indian’s led the country in a better position even in the eve of global financial crisis. The   insurance sector shows a setback during the years 2007-08 and 2008-09 due to the global meltdown. The life insurance sector had able to overcome the short time setback mainly because of the investment attitude of the people in the country and made the financial year 2009-10 in a growth stage .The  results of the insurance companies during the year 2010-11 also show an upward trend. This clearly indicates that life insurance sector will continue to grow in future because of the peculiar nature of the inhabitants in the country and also due to huge untapped potential in this sector in the country. The increase in disposable income, aging population, no universal life cover and tax benefits to life insurance products make life insurance market an attractive proposition for insurance companies. The crisis made the insurance companies more competitive in their products and efficient   in their administration leads to better products to the consumers.Untapped rural markets, lower consumer preference and constrained distribution channels are understood to be the reasons for the lower levels of penetration. And more reforms will certainly make this growing sector appear more attractive for existing and newer participants.