Economic Liberalization and Insurance

• Preface
• Meaning and definitions of economic liberalization
• The emergence and development of economic liberalization in the insurance sector in India
• Liberalization of India
• Benefits or positive effects of liberalization in the insurance sector
• Side effects or demerits of liberalization of insurance,

Economic liberalization, privatization and globalization have become the key to economic development in the modern world. Today no economy can even imagine its development without adopting economic liberalization. The concept of economic liberalization is based on the basic concept of trade without restrictions and control, which has given rise to privatization and globalization and as a result of which today the whole world has turned into a small village or global village, in which the parties to trade freely from one country. Can enter the borders of another country.

This concept of economic liberalization has affected the economies in a big way. Today no sector of the economy is untouched by economic liberalization and the insurance sector is no exception to it. In the last few years, private sector and foreign companies have entered the field of insurance, which has absorbed the government monopoly and control that has been going on in the insurance sector for decades, on the other hand, the development, customer service and satisfaction of the insurance sector. New dimensions have been given.

The meaning of economic liberalization is to finally eliminate the various restrictions and controls imposed by different countries in the field of trade and economic activities for the protection of their private national interests, by gradually loosening them, so that barrier-free, restriction-free and control-free trade in different countries and Economic activities should be possible and ultimately the vision of the world community can be realized as a border less, barrier-free, tariff-free, control-free and restriction-free society. Liberalization is the integration of the economy of a country with the economies of the whole world.

In economic liberalization, as trade and economic activities are carried out between two different states, regions or cities of a nation, in the same way trade and economic activities are conducted between two or more different countries of the world community.

In this context, prolific socialist thinker and former Finance Minister of the Government of India, Prof. The thoughts of Madhu Dandvate are absolutely relevant. Pro . According to Dandawate, “Economic liberalization refers to such efforts by which the economy is freed from its elasticity and from those arbitrary controls and processes of bureaucracy which give rise to delay, corruption and inefficiency and reduce the quantity of production.”

In the words of Hershmann, “Economic liberalization is a set of active changes, which generally involves the following changes/processes –

1. Controlling the suppressed or backward domestic sector,
2. Providing international direction to domestic market and policies and,
3. Social To re-establish control over some activities and areas to give shape to the new concept of welfare.

Constituencies and administrative controls and procedures are thus enforced and economic controls and constraints are thus loosened and eventually eliminated respectively. So that free and barrier-free trade and economic activities can be done between different countries of the world so that maximum economic development of all the countries of the world can be possible at the fastest rate.

The process of economic liberalization in India had started in the early 1990’s and its roots were felt in the insurance sector since that time. The demand started gaining momentum in the Indian Parliament and outside the Parliament that for the proper development of the insurance sector in India, it is necessary to free it from government control, so it should not be operated as a government undertaking or department but on a commercial basis. The Congress government formed under the leadership of ” Late Shri P.V. Narasimha Rao ” started efforts to bring economic liberalization in the insurance sector and the current Prime Minister and the then Finance Minister Dr. Manmohan Singh announced liberalization in the insurance sector in his budget speech given in the Parliament in 1993-94. Many efforts were made to implement this declaration. In April 1993, former RBI governor R. C . A committee was constituted under the chairmanship of Malhotra which submitted its report in January 1994. During the tenure of the United Front government, unsuccessful attempts were made to get the Insurance Regulation and Development Authority Act passed twice, first in 1996 and again in 1998. This act could be passed in December 1999 during the tenure of National Democratic Alliance (NDA), which proved to be a milestone in the field of economic liberalization of insurance. In 2004, the current Prime Minister Dr. The government of the United Progressive Alliance (UPA) formed under the leadership of Manmohan Singh made many concerted efforts towards economic liberalization of the insurance sector, especially opening the insurance sector to foreigners, increasing foreign participation in the insurance sector and disinvestment of the insurance sector. The expected results could not be achieved due to strong resistance from the participating communists. Again in 2009, Dr. Under the leadership of Manmohan Singh, the government of United Progressive Alliance, in which communist is not a participant, has been formed and it should be expected that concrete steps will be taken by this government to bring liberalization in the insurance sector.

A brief account of the important steps taken to bring about economic liberalization in the insurance sector is as follows –

1. Formation of Malhotra Committee – Dr. RC to reform the insurance sector and regulate the insurance sector in April 1993 under the chairmanship of Mr. Malhotra, former governor of the Reserve Bank of India, to give a concrete shape to the announcement of liberalization in the insurance sector in the budget speech of Manmohan Singh for the financial year 1993-94. . Malhotra committee was formed. The following were the terms and references of this committee. Examining the structure of the insurance industry and knowing its merits so that an efficient and economical insurance industry can be developed. To give special suggestions to Life Insurance Corporation and General Insurance Corporation so that they can make necessary improvements in their functioning according to the changed economic scenario. Advising the government to allow private sector and foreign insurance companies to enter the insurance sector. To advise on such matters as the Committee may consider necessary for the efficiency and long-term growth of the insurance industry. The Malhotra Committee submitted its report of the study to the Central Government in January 1994 according to the terms and conditions submitted to it. The committee gave place to 27 recommendations in its report, some of which are prominent as follows – The insurance sector should be privatized in a controlled manner. If foreign companies are allowed to enter the insurance sector in India, they should be asked to set up their companies in India, which are in partnership with Indian companies. Premiums and contributions to pension schemes run by insurance companies should be exempted from tax. There should be an insurance institution on the lines of a controller of insurance, which should be given full rights related to regulation. 50 percent of the shares held by the government in Life Insurance Corporation and General Insurance Corporation should be disinvested in public and employees.
2. Insurance Regulation and Development Act (IRDA) – Taking steps towards the implementation of the recommendations presented by the Malhotra Committee, the government made efforts to get the Insurance Regulation and Development Authority Act passed. Prior to this, the bill was introduced in the Lok Sabha in 1996 and then in 1998, but unfortunately both the times the government could not get the bill passed. Again in 1999, a bill was introduced in the Lok Sabha to make the Insurance Regulation and Development Authority Act, which was passed by the Lok Sabha on 01 December 1999. This bill was signed by the President of India on 29 December 1999 and stamped his assent. Thus the Insurance Regulation and Development Authority came into existence in 1999, which gave impetus to the process of liberalization and privatization in the insurance sector.
3. Amendment in the existing Acts – With the passing of the Insurance Regulation and Development Authority Act, the existing Acts related to insurance such as LIC. The corresponding amendments in the Act, GICI Act etc. had become necessary, so the necessary amendments were made in them as follows –
   1. Life Insurance of India Act 1956 – By amending this act the monopoly of the corporation on the life insurance business was abolished.
   2. General Insurance System (Nationalisation) Act 1969 – By amending this Act, the right of the corporation and the four subsidiaries on the general insurance business was abolished.
   3. Insurance Act 1938 – By amending this act, all the rights related to regulation and control of insurance business were transferred to the Insurance Regulation and Development Authority.
4. Establishment of Insurance Regulation and Development Authority – In exercise of the powers conferred in Section 3 of the Insurance Regulation and Development Authority Act, 1999, the Insurance Regulation and Development Authority was constituted by an order issued by the Central Government. A provision was made to have 9 members in addition to a chairman in this authority. Mr. N. Rangachari was appointed as the first Chairman of the Authority. The following main duties of this authority were prescribed –
   1. To regulate and promote insurance and reinsurance business, and
   2. To ensure systematic growth of insurance and reinsurance business. Certain powers and functions given to the Authority to discharge its duties properly are as follows:-
      1. Issuance of registration letter / permit to the applicants and its renewal, cancellation, modification or postponement.
      2. To protect the interests of the insured in matters such as nomination, handing over of insurance policies, determination of insurable interest, settlement of insurance claims, surrender of papers and determination of other terms and conditions of the policy.
      3. To determine the qualifications, code of conduct and training etc. of insurance agents and intermediaries.
      4. To lay down a code of conduct for insurance surveyors and loss appraisers.
      5. To increase the efficiency of conducting the insurance business.
      6. To encourage professional associations dealing with insurance and reinsurance.
      7. To levy and recover duty for the purpose of this Act.
      8. To call for information from insurers, intermediaries and other organizations connected with the insurance business, and to conduct their examination, investigation, investigation and audit.
      9. To regulate and control the rates, benefits and conditions of the plans offered by the insurers of such insurance business which are not controlled by the Tariff Advisory Committee.
      10. To regulate the maintenance of solvency limits.
      11. to regulate the investment of funds of insurance companies.
      12. To monitor the work of the Tariff Advisory Committee.
      13. Settlement of disputes arising between the insurers and the intermediaries.
      14. To determine the percentage limit for undertaking life insurance and general insurance by insurers in rural or social areas.
      15. To determine the percentage of premium income of the insurers for the implementation of schemes for promotion of professional associations.
      16. To exercise other conferred rights.
5. Constitution of Insurance Advisory Committee – Insurance Authority has constituted a 25 member Insurance Advisory Committee by issuing a notification. Apart from this, some ex-office members have also been kept in the committee who represent trade, commerce, transport, agriculture consumer union surveyors, agents, brokers, employees unions etc. in the committee.
6. Declaration of rules – The Insurance Regulation and Development Authority has announced that the rules being made for the regulation of the insurance business will come into force within 90 days of the formation of the Authority. The authority has so far declared rules regarding the following-
   1. The accounting standards of insurers and the rules relating thereto,
   2. The rules relating to insurance underwriters,
   3. The rules relating to insurance surveyors,
   4. The rules relating to payment from brokers and brokerage,
   5. The rules relating to insurance agents,
   6. Rules regarding liability of insurers in relation to rural and social areas,
   7. Rules regarding insurance advertisement and disclosure,
   8. Acturial rules,
   9. Reinsurance rules,
   10. Insurers Rules relating to assets, liabilities and solvency of,
7. Making Actuarial Appointment Compulsory – The Insurance Authority has made it mandatory for all the insurers to appoint an actuary in its top management and its approval. The actuary will give business advice to the insurer. Primarily he will advise in matters relating to development of insurance products, fixing premiums, setting conditions, investing insurance funds, getting reinsurance done which will help the insurer to maintain its solvency and financial stability. The actuary shall inform the insurance authority of the irregularities, discrepancies being observed in the functioning of the insurer. He will make reasonable efforts to fulfill the reasonable requirements of the insured,
8. Application for and issue of license – The Insurance Authority seeks applications for permits from the insurers and completes the work of scrutiny of applications within a maximum of 120 days from the date of receipt of applications. According to the rules of the Insurance Authority, the license issued to private companies is non-transferrable and if the insurer does not use it within the stipulated period, he will have to return it to the authority.
9. Determining the boundaries of rural and social insurance business – In order to ensure that the benefits of insurance facility can be equally available in rural areas, backward areas and socially deprived areas, the Insurance Authority has established insurance business in rural and social areas. The minimum limit has been prescribed for private insurers.
10. Fixing the capital norms – The Insurance Authority has fixed the capital norms for issuing licenses for private sector insurers which are as follows –
    1. Minimum paid-up capital of the insurer is Rs.100 crores. Will be
    2. The minimum paid-up capital of the reinsurer company is Rs.200 crore. Will be The maximum share of foreign capital in these companies will be limited to 26%. The Authority has fixed the capital norms as follows for issuing license for brokerage:-
       1. Minimum capital for the brokers of the insurer is Rs.10 lakhs. Will be
       2. The minimum capital for brokers of reinsurers is Rs.25 lakhs. Will be The maximum share of foreign capital in brokerage entities can be up to 76%.
11. Fixing capital ratio for domestic companies – Domestic companies ie Indian companies can invest up to 100 percent of its capital in insurance business, but if a domestic company has a foreign partner, then their capital ratio should not exceed 26 percent can . Not only this, all such domestic companies will have to bring down their capital ratio to 26% over a period of 10 years.
12. Determination of investment limit of funds – The Insurance Authority has prescribed that every insurer will have to invest at least 50 percent of its funds in government and government approved securities. The insurer shall not invest more than 50 percent of its total funds in shares, debentures, bonds and bank deposits of private sector companies.
13. Banks and financial institutions allowed to enter the insurance sector – The Reserve Bank has amended the Banking (Regulation) Act, 1949, allowing banks and financial institutions to enter the insurance sector. This has led to a healthy competition in the insurance sector and improved services to the customers. Along with setting the investment limit of banks and financial companies, the Reserve Bank of India has also set other rules, which are as follows –
    1. Any bank may invest an amount up to 50 per cent of the paid-up capital of any insurance company, but the Reserve Bank may, if it so desires, increase this limit of 50 per cent to 74 per cent in the case of some selected banks, subject to the condition May allow that such banks will have to bring down their investment limit to 50 percent within the prescribed limit.
    2. The investment limit of the foreign partner in such insurance company shall not exceed 26 per cent of the defaulting capital of the insurance company.
    3. If a bank is allowed to invest up to 74 per cent of the paid-up capital, the remaining 26 per cent will be invested by another Indian partner.
    4. The non-performing assets of the investing bank should not exceed a reasonable limit.
    5. Net worth of the investing bank is Rs 500 crore. should not be less than
    6. The capital adequacy ratio of the investing bank should not be less than 10 per cent.
    7. The investing bank should have earned profit continuously for the last three years.
14. Approval of new products – Every insurance company will have to get its new insurers approved by the Authority before releasing them in the market. The authority will have to decide and inform about the approval or rejection of the new product within 30 days of receipt of the application. Many insurance companies whose H. F . D . C . Life Standard, IC. I . C . I . Prudential, Max New York, Kotak Mahindra, Tata AIG. etc., have got their products approved and have also presented them in the market.
15. Implementation of the code of conduct – The Insurance Authority has formulated and implemented the code of conduct for the insurance brokers. In this code of conduct, many things have been given related to customer relations, sales behavior, responsibility of giving information to customers, advertisement, bappointment of sub-broker, remuneration etc., whih brokers have to follow.

The scope of liberalization of insurance is very wide. For this many actions are required to be performed. It would be preferable to take the following steps for liberalization of insurance –

• To re-examine the rules governing the insurance business and bring about necessary reforms in them.
• To provide freedom to private sector banks and financial institutions to enter the insurance sector.
• To make effective arrangements for the regulation of insurance and to remove the barriers blocking its growth.
• To generate and maintain healthy competition between private and public sector insurance companies.
• To ensure the cooperation of foreign undertakings/institutions in the insurance sector.
• Privatization of Life Insurance Corporation and General Insurance Corporation and its subsidiaries.
• To regulate and control the flow of foreign capital in the insurance sector so that the flow of necessary capital in the insurance sector can be ensured continuously.
• To expand the postal insurance service to develop and expand the insurance business in rural, backward and socially disadvantaged areas of the country.
• To establish Insurance Regulation and Development Authority and to provide all the powers of the Insurance Act.
• To make effective arrangements for providing efficient and effective service to the insurance holders.
• To provide guidelines for determination of insurance premiums on a reasonable basis.
• To encourage the development of new insurance products.

Taking all the above steps will help in ensuring economic liberalization of insurance in India.

As a result of liberalization, the insurance sector has become free from inefficiency, flexibility, government control, red tape, bureaucracy etc. and its efficiency and productivity have increased. As a result, liberalization has benefited all parties. The insurance business itself, the insurers, the insured, the employees and finally the entire economy has benefited from liberalization. In brief, the positive effects of liberalization on the insurance sector can be studied under the following headings –

1. Benefits to the economy – As a result of economic liberalization in the insurance sector, the entire economy has benefited in many ways. Liberalization has resulted in the availability of world class markets to Indian insurers. There has been more capital formation, income and employment have increased, foreign exchange reserves have increased, more capital has become available for implementation of government schemes and investment in domestic industry, government income has increased and there has been full investment in the social sector. has become possible. The rural, backward and socially disadvantaged sections of the country have got the benefit of insurance, due to which the balanced development of the economy has become possible. In brief, the effects of liberalization of the insurance sector on the economy of the country can be understood with the help of the following headings.
   1. Availability of world class market – Liberalization has linked the Indian economy with the whole world economy. As a result Indian insurers have got access to all the markets of the world. And there has been availability of world class market for doing business of insurance.
   2. More employment – With the expansion of the insurance sector as a result of liberalization, the insurance business will flourish more. As a result, employment opportunities will be available to more and more people. It can also be seen directly that today more and more people are getting employment in the insurance sector.
   3. Higher income and savings – Liberalization in the insurance sector has provided new employment opportunities, due to which the income of the people has increased and as a result both the propensity to consume and save has increased.
   4. Increase in Effective Aggregate Demand – As a result of more employment and income, the purchasing power of the people has increased and thereby the aggregate effective demand has increased. Due to this, industries have developed in the country.
   5. Promotion of capital formation – Due to liberalization in the insurance sector, employment, opinion, purchasing power and savings have increased. As a result, capital formation in the country, which is considered essential for national development, has been encouraged.
   6. Increase in premium amount – As a result of increase in employment and income, more and more people are worried and aware about the safety of themselves and their families, due to which they are inclined to get insurance, this will increase the amount of premium received which will eventually increase. Will make an important contribution to the development and basic preparation of the country. According to the estimates of Confederation of Indian Industry ( CII ) where in 1999-2000 Rs. 20000 crores . The amount is received in the form of insurance premium whereas by 2009-10 this amount will reach up to Rs.148000 crores.
   7. Development of infrastructure – Insurance companies have to invest at least 50 percent of the premium received in government securities or securities approved by the government. This will help in preparing the country’s infrastructure like roads, railways, power resources, telecommunications, transport and electricity etc.
   8. Promotion of industrialization in the country – As a result of liberalization in the insurance sector, there will be an increase in some demands effective in encouraging capital formation and the infrastructural development of the country will be possible, which will encourage the industrialization of the country. Not only this, due to the development of the insurance sector, industrialists will also get protection from the risk of setting up big industries, which will encourage them to set up large and heavy industries in the country.
   9. Increase in Foreign Exchange Funds – As a result of liberalization, the insurers of the country will be able to do their insurance business abroad, due to which premium amount will be received in foreign currency and the foreign exchange funds of the country will increase.
   10. Increase in government income – Liberalization will result in the entry of private sector and foreign companies into the insurance sector and which will earn huge income by doing insurance business in the country. The government will receive a huge amount of tax on this income.
   11. Extension of insurance to rural, backward and socially disadvantaged sections – The insurance authority has set minimum business requirements for private insurers in rural areas and socially disadvantaged sections. The limit has been fixed, as a result, these companies will have to do insurance business in these areas, so that they can get the benefit of insurance facility.
   12. Expansion of social sector – Due to the development and expansion of insurance, there will be an unimaginable increase in the income of the government. The government will use this income for social services in the country like education, health, clean drinking water, family welfare, maternal child welfare etc., which will expand the social sector.
   13. Helpful in the development of organized capital market – Insurer companies will spend a significant part of the huge amount received in the form of premium in buying and selling of shares and debentures of companies listed in the stock exchange center, which will help in the development of organized capital market in the country. Will get help.
2. Benefits to the Insurance Industry / Insurers – As a result of liberalization in the insurance sector, the insurance industry itself will develop and insurers will get many benefits. The insurance industry is likely to get the following benefits from liberalization.
3. Benefit to the insured/consumers – The maximum benefit of liberalization of insurance has been to the insured or the consumers. Due to liberalization they have got access to new insurance products, products and services have become available at competitive prices and customer satisfaction has increased. In short, the liberalization of insurance has brought the following benefits to the insured.
   1. Access to new products – As a result of liberalization, the insurers who have entered the market have developed new products according to the need of the insured, which has made it possible for the insured to have access to new products.
   2. Facility of Insurer Selection – Before liberalization, limited selection freedom was available to the insured to get insurance, but due to liberalization many insurers have entered the market, among them the insured can choose the insurer of his choice.
   3. Availability of Services at Competitive Price – Liberalization has increased the competition in the market. Insurers reduce the prices of their products to stay competitive. As a result, consumers have started getting insurance services at competitive prices.
   4. Excellent Services – Liberalization has resulted in the expected improvement in the services of the insurers, thereby providing excellent insurance services at reasonable prices to the insured.
   5. Increase in Customer Satisfaction – Due to liberalization the competition has increased and in order to retain the customers with green increased competition, the insurers have to provide excellent services, which have benefited the insured.
   6. Timely Payment of Claims – As a result of liberalization, the insurers have started making timely payment of all the teeth of the insured, which has benefited the insured.
   7. Benefits of Social Security – New insurers entering the insurance sector after liberalization have brought many social security schemes like old age pension, insurance accident insurance, medical insurance etc. for the insured.
   8. Family Happiness – Peace – Due to insurance, the insured have got economic and social security so that they can lead a stress free life and this has increased their family happiness and peace.
4. Benefits to the employees – The working class has also not remained untouched by the benefits of liberalization in the insurance sector and they have got many benefits from it. Following are the major benefits received by the employees from the liberalization of insurance.
   1. More employment opportunities – Liberalization has led to unprecedented growth and expansion of the insurance sector and increased employment opportunities, which have benefited the employees.
   2. Promotion and Growth Opportunities – Due to the growth and expansion of its sector with the liberalization of insurance, many new insurers have entered the insurance sector, thereby providing opportunities for promotion and development to the existing employees.
   3. Increase in employee mobility – With the entry of new insurers into the insurance sector, employees can choose the employer of their choice, which has increased their mobility.
   4. Training and Development Facility – Insurers are providing education to their employees to keep them updated and to prepare them for competition, the benefits of which are being available to the employees.
   5. Increase in Efficiency and Productivity – As a result of the training provided by the insurers to the employees, their competency, efficiency and productivity have increased.
   6. Increase in employability – As a result of increase in competence, efficiency and productivity through training, the employability of the employees has also increased.
   7. Higher remuneration and facilities – As a result of liberalization in the insurance sector, employees have started getting more remuneration and better facilities than before.
   8. Increase in the standard of living – Liberalization has increased the income of the employees. As a result their standard of living has increased.

It is no exaggeration to say that liberalization of insurance has proved to be very useful for the confidence and expansion of the insurance business. And it has benefited all the parties, however liberalization of insurance has not proved to be completely faultless and it has been criticized by critics on many grounds. Critics are of the opinion that liberalization will lead to the entry of foreign companies and financial institutions in the insurance sector, which will work with advanced technology and Indian companies will not be able to survive in their competition and will become premature.

Critics have also expressed the apprehension that foreign companies may follow a dumping policy to drive out Indian companies from the competition, under which these companies may initially set a price less than the cost price to establish dominance in the Indian market. will present its products and services. Critics also agree that leaving Indian companies in competition with foreign companies without providing a level playing field would be the same as leaving a lamb in front of a lion and asking it to fight, in which Defeat is certain. In brief, the demerits / ill effects of liberalization in the insurance sector can be understood with the help of the following points.

1. Neglect of rural and backward areas – Before liberalization in India, there was complete government control on the insurance sector and government companies work on the principle of Bahujan Hitaya, Bahujan Sukhay rather than the feeling of private profit, so they are rural and backward areas, which are so much Not very profitable, I am also providing insurance services. After liberalization, there is an apprehension that private sector and foreign insurance companies which work for profit motive will ignore these sectors.
2. Cut-throat competition – Liberalization of insurance will start the entry of private sector and foreign insurance companies in the insurance sector, in which fierce competition will arise in order to maintain their existence and dominate the market, which will ultimately prove to be harmful for all sections.
3. Threat to the interests of the insured – Critics believe that private sector insurance companies cannot be trusted much and private sector insurance companies can indulge in scams at any time, which can harm the interest of the insured. In this context, he refers to the ‘Mundda scandal’ which took place in the 1950s, which forced the government to nationalize the insurance business.
4. Decrease in investment in the public sector – Before liberalization, the insurance business was monopolized by government companies and these companies used to invest the majority of their income and funds in government and government approved securities, so that public projects were completed, development plans There has been a lot of cooperation in promoting the social sector. After liberalization, there is a possibility that foreign companies will send most of their income to their country, which may reduce investment in the government sector.
5. End of State Control – Before liberalization, the government had complete control over the insurance sector, but after liberalization, the government would not have such control over the insurance sector. which may harm the interests of the public.
6. Hegemony of foreign institutions – Critics are of the opinion that liberalization will establish the hegemony of foreign companies and institutions over the country’s insurance industry, which can prove to be against national interests. In support of his argument, he cites the example of the East India Company, which initially came to India for the purpose of trade and gradually established its rule over the entire country.
7. Insurance papers of large amount – Critics are of the opinion that private sector and foreign insurance companies will issue only large amount of insurance papers, whose benefit will not be available to the poor and backward sections of the public. With regard to his argument, he refers to the large minimum amount prescribed for opening accounts in private sector and foreign banks.
8. Neglect of national interests under external pressure – Critics also believe that the government has succumbed to the World Trade Organization (WTO) and GATT in the matter of implementing liberalization in the insurance sector. And the government has sacrificed national interests under the pressure of these organizations.
9. Speculation trend – Critics are of the opinion that liberalization will encourage the tendency of speculation in the insurance sector and private sector and foreign insurance companies for their immediate benefit manufacture insurance papers and determine the amount of premium based on actual facts. Expectation will be done in a betting spirit.
10. Promotion of profitable insurance – After liberalization, private sector and foreign companies will work in the spirit of their profits and there is ample possibility that they should promote the practice of only those insurers which are more profitable and to fulfill social obligations. Ignore the insurers issued for
11. Lack of government guarantee – There is a guarantee from the government on the money invested in the Life and General Insurance Corporation and its subsidiaries, but there will be no such guarantee on the money invested in private sector and foreign companies.
12. Fear of loss to gullible investors – Critics are of the opinion that after liberalization, private sector and foreign insurance companies will come up with attractive and high returns lucrative insurance schemes in which gullible investors will invest their money and such The employers may suffer.
13. To meet the budget deficit – Critics are of the opinion that the government is deliberately liberalizing the insurance sector to disinvest the capital of government corporations to meet its fiscal deficit.
14. Apprehension among the employees- Liberalization of insurance sector has created apprehension in the minds of the employees working in government insurance corporations that they will be removed from service and they will face a cut of livelihood.
15. Fear of deprivation of service of key people – Critics are of the opinion that after liberalization, private sector and foreign insurance companies will attract the employees and officers currently working in these companies by offering big salaries and facilities. Government insurance corporation should be from important persons.

On looking at the appropriate side-effects/defects/criticisms of liberalization of insurance, it appears that most of these are untrue, immaterial and based on fantasies. It has been almost a decade since the liberalization of insurance in India, but in this period none of the above mentioned flaws and apprehensions have proved to be true. On the contrary, during this period the insurance sector in India has made amazing progress and has grown and expanded beyond imagination.