Indian insurance industry is as old as it is in any other corner of the globe. India has seen many players both domestic and foreign providing insurance services in the past. Many regulations were passed to regulate domestic banks however these regulations became insignificant with time. As an effect government nationalized the banks in 1964 by combining about 250 Indian Life insurance companies to form Life Insurance Corporation of India (LIC). With this move, the industry transformed into a regulated monopoly from being competitive. By nationalizing, government could effectively channelize more resources towards national development programs, could increase penetration into the market and also could protect the interests of the public at large.
With the implementation of New Industrial Policy in Financial Year 1991 economy was opened up for foreign investments and sectors like banking and finance were liberalized. With the recommendations of Malhotra committee in 1994, insurance sector which was under the monopoly of LIC, was opened up for private players because more innovative products were required to serve the customers. With the entry of private players into insurance sector, two legislations were passed by government of India. One was the Insurance Regulatory and Development Authority (IRDA) Act, which made IRDA a statutory body. Second was the LIC and GIC Acts, which ended monopoly in the insurance sector and thereby liberalizing the insurance sector in Financial Year 2000.
With the liberalization of Indian insurance sector, many private players have entered this market making it very competitive and dynamic. The first year premiums have increased by 400% in the first 8 years after the liberalization. Presently there are 24 private players offering life insurance products in India, but majority of market share exist with LIC (about 70%). With increased competition in life insurance sector, private players started introducing very innovative and customized products to customers thus making the industry more competitive. To sustain the competition, companies started innovating distribution channels which helped in taking insurance products to places where it never reached.