Discuss the advantages and disadvantages of the private insurance sector.
Ans:- Meaning:- Private insurance companies means when the government has no direct control over the insurance company it is called private companies. When the control of business is in the hands of the private. They can manage tasks as per their choice.
In other words:- When the government has shares less than 50% in any insurance company it is called Private.
The Narasimha Rao government which opened many liberal changes in India’s rigid economic structure. Many private players have entered into many financial institutions. Same in the insurance sector also they have entered due to the liberal policy in insurance.
Privatisation has brought surprises for the insurance sector. Private organisations are striving hard and hard to develop the insurance sector. benefits of insurance | benefits of insurance
Advantage of Privatisation :- There are some advantages which reach to the society of the country.
- Untapped Market
- Product range
- Comprehensive Risk Coverage
- Market Awareness
- Growth of Economy
- Better Customer Services
- Opportunity for Banks
- Untapped Market:- New floating industry can benefit from an untapped market. Whether LIC and GIC are extending their services throughout the country. But options available to the public are inadequate in terms of services, products and prices the untapped in quite large.
- Product range:- The available products to the customers has been increased in the deregulated market that introduced the different products. More competition in this business will be zealous firms to offer several new products.
- Comprehensive Risk coverage:- Privatisation in insurance enables people in India to cover a larger variety of risks. The products of LIC and GIC lack flexibility. Whereas privatisation provides flexibility in the insurance market.
- Customization:- There are many options to the customers so as to choose their products as per their suitable needs. Advisors build relationships with their customers and help them better understand the value of life insurance and sell their products needs based manners.
- Market Awareness:- Privatisation company of insurance spent a large amount on their brands which helps create their awareness about the insurance. Due to their competition they create brands among society for marketing scope.
- Growth of economy:- Due to the privatisation many foreigners invest in the insurance system upto 26 percent which enhance the growth of the economy.
- Better Customers Services:- When the privatisation system is started in the country they are delivering better services of insurance to the customers. Competition compels the players to bring new and innovative products.
- Opportunity for Banks:- Better customer services will be provided due to the privatisation. Quality service and wider prices will be provided to the consumers.
However, with the open of privately insurance sector to insurance market has some disadvantages also ;
- Concentration on wealth
- Exploitation by Private Sector
- Price War
- Lack of consumer Education
- Concentration on wealth:- Private insurance concentrates on the wealth which is in the hands of the private. It means only rich people will reap the fruits of industrialization.
- Exploitation by Private Sector:- Private sector will exploit society members in the same localities. Because they offer more prices and goods and services. They also terminate workers to reduce the cost of production. Thus unethical practices of insurance companies invite several problems in the insurance industry.
- Price war:- In order to attract more customers insurance companies have to compete with each other regarding their prices of products due to which bankruptcy will occur in insurance companies. Wrong fixation prices of their products induces such companies towards the unsuccessful business in the market.
- Lack of consumer education:- Most of the consumers are unaware of the insurance products. Even the educated persons ignore the various products of insurance. Due to this, private insurance companies misappropriate their funds and charge very high for their policies.
Conclusion:- Now we can understand the importance of the private insurance sector by analysing the advantages of private insurance. However, it’s some demerits which we must consider. So private insurance plays an important role in the insurance sector.
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