Impact of Supervisory Interference on the Profitability of Life Insurance Companies – (An Analytical Study)

Abstract

India is the second most populous country in the world, whose rapidly developing economy, is wideningthe gap between rich and poor. Insurance & Microfinance allows the poor to get the loans; they need tosave, invest, and create a sustainable profitability & lifestyle of financial independence and growth.Life insurance in India is a growth-oriented industry. In the year 2000, life insurance industry has beenliberalized after more than fifty years of monopoly with Life Insurance Corporation of India. There aretwenty four life insurance companies operating in India at present (IRDAI, Annual Report-2013-14).During the period of fourteen years after liberalization, private life insurers have launched manyinnovations in the industry and it is at this juncture it has become imperative to study the profitabilityperformance of these companies. Thirteen life insurance companies have been selected from the Annual Report of IRDAI, 2013-14 for the purpose of study which are fully in operation for ten years from 200405 to 2013-14. The study finds that uncontrolled volumes of underwriting losses are being incurred bythe insurers in the life insurance sector in our country. The study also finds that there has been atendency to offset underwriting losses by investment income by the select life insurance companies in thecurrent fluctuating market which is a very risky insurance management practices in India. As a result,life insurance companies are required to pay more attention on efficient underwriting; otherwise theirsustainability in the market will be questionable. However, underwriting losses can be minimized if theinsurance regulator makes proper risk management practices mandatory.