International Journal of Research in Finance and Marketing

The liberalization of the Indian insurance sector has been the subject of much heated debate for some year. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is extremely essential for channeling the investments in to the infrastructure sector. At the other end, the policy makers had the fears that the insurance premier, which are substantial, would seep out of the country, and wanted to have a cautious approach of opening for foreign participation in the sector.

As one of the rare occurrence, the entire debate was put on the back burner and the IRDA saw the day of the light thanks to the maturing polity emerging consensus among factions of different political parties. Though some changes and some restrictive clauses as regards to the foreign participation were included, the IRDA has opened the doors for private entry into insurance.

Whether the insurer is old and new, private and public, expanding the market will present multitude of challenges and opportunities. But they key issues possible trends, opportunities and challenges that insurance sector will have still remains under the realms of the possibility and speculation. What is the likely impact of opening up India's insurance sector? The large scale of operations, public sector bureaucracies and cumbersome procedures hampers nationalized insurers. Therefore, potential private entrants expert to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer.

The critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customer as foreign banks did until recently. This seems to be a logical strategy. Start-up costs-such as those of settings up a conventional distribution network-are large and high-end niches offer better returns. However, the middle-market segment too has great potential. Since insurance is a volumes game. Therefore, private insurance would be best served by a middle-market approach, targeting customer segments that are currently untapped.