I.B.A.I. ON BEHALF OF LICENSED INSURANCE BROKERS IN INDIA WISH TO GIVE YOU AN UPDATE ON WHY INSURANCE BROKERS WERE BROUGHT INTO THE INDIAN INSURANCE SECTOR AND WHY YOU AS AN INSURANCE BUYER NEED TO AVAIL OF THE SERVICES OF INSURANCE BROKERS.

Govt. of India decided to embark on economic reforms in the 1990s. The command and control economy gradually gave way to market economy in sector after sector, including the financial sector which comprised “Insurance” sector. Various reforms were initiated in the financial sector. The economy responded positively to the reforms. Competition in the manufacturing sector geared it up to invest in technology, restructure its operations, reduce cost, achieve improved productivity, bring quality of products to international standards. Newspaper Articles started highlighting the success stories of several enterprises in the Open Market Indian Economy to demonstrate what could be achieved in a liberalized market economy.

Along with financial sector reforms, there were many reform measures by the Govt. for the insurance sector.Insurance Sector Reform Measures initiated by the Government were based on the Report of the Malhotra Committee, which submitted its Report in 1994. The main observations of the Malhotra Committee were :

1. There was hardly any worthwhile competition in the insurance sector;

2. With progressive reduction in the agency commission structure there was no scope for any well informed or trained career agency organization to emerge;

3. The only Government Companies in the insurance sector resorted to appointing salaried development officers to sell its insurance covers which resulted in growing staff burden and attendant problems;

4. The service aspect suffered and customer satisfaction was a casualty. Insurance consciousness did not percolate and spread.
   

The Malhotra Committee, therefore, among other things, recommended :

1. Opening of insurance industry to competition. Apart from making the four operating Government Companies in general insurance autonomous, other private players to be permitted;

2. Creation of a Regulatory Authority for providing a level playing field to all entities operating in the country;

3. Development of an efficient and professional marketing structure to spread the message of insurance, improve service and customer satisfaction;

4. Introduction of Broking Firms who would act as professional intermediaries as in other established markets.

Insurance Regulatory Authority was established as an Interim Regulator in 1996 and became a full-fledged statutory ­Insurance Regulatory and Development Authority (IRDA) in 1999 with the passing of IRDA Act of 1999 on 19^th April 1999.