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Abstract
Insurance is a matter of facilitation. It is the most effective risk mitigation mechanism to reduce the vulnerability of the people to the impact of disease, disability, untimely death, and natural catastrophes. In a developing country like India the need for such a safety net is much greater, particularly at the low income levels where vulnerability to risk is much greater and social security programs are not effective due to poor governance. Insurance reforms are a prerequisite for reforms in social security, health care systems and financial markets. In developed economies insurance companies and pension funds are a major source of long-term capital and have dominant share (50 per cent or more) in total financial assets.1 They provide funding for end-of-service indemnity, life insurance benefits, annuity and gratuity. They also increase the depth and liquidity in stock and bond markets, particularly in long-term bonds.