History of Insurance in India
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ), and Kautilya ( Arthasastra ).
Let's take a deep dive into the history of India...
History of Insurance
The life insurance business began in India in 1818 with the establishment of the Oriental Life Insurance Company in Culcutta, but the company failed in 1834.
The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century.
The Indian Mercantile Insurance Ltd was the first company to transact all types of general insurance business.
Madras Equitable started conducting life insurance business in the Madras Presidency in 1829.
The British Insurance Act was legislated in 1870.
In that era, the Insurance business was dominated by British companies like Bombay Mutual (1871), Oriental (1874), and Empire of India (1897).
The Indian Life Assurance Companies Act and the Provident fund act were enacted in 1912 to regulate the insurance business.
Under the Life Assurance Companies Act, 1912 it made necessary that the premium-rate tables and periodic valuation of companies must be certified by an Actuary.
In 1914, the government of India started publishing insurance-company returns.
National Insurance Company Limited (NICL) is the oldest existing insurance company in India, which was established in 1906.
In view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the insurance act, 1938.
Due to the effect of new Insurance amendments, there were many active insurance companies, and the level of competition was high.
Increased competition led to unfair trade practices, The Government of India, therefore, decided to nationalize the insurance business.
An Ordinance was issued on 19 January 1956, nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year.
The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers, and 75 provident societies—245 Indian and foreign insurers.
LIC had a monopoly till the late 90s when the insurance sector was reopened to the private sector.
The General Insurance Council, a wing of the Insurance Association of India was formed in 1957.
In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.
The General Insurance Corporation of India was incorporated in 1971, but it commenced business on 1 January 1973.
General Insurance business was nationalized from 1 January 1973. As a result of this, 107 insurance companies were amalgamated and grouped into four companies, namely National Insurance Company, the New India Assurance Company Ltd., the Oriental Insurance Company Ltd, and the United India Insurance Company Ltd.
In the early 1990s, the process of re-opening of the sector had begun.
In 1993, at the time when Narsimha Rao was the Prime Minister of India the government, set up a committee under the chairmanship of RN Malhotra, former Governor of RBI.
The objective of the committee was to complement the reforms initiated in the financial sector and to propose recommendations for reforms in the insurance sector.
In 1994, the committee submitted the report, in which it recommended that the private sector be permitted to enter the insurance industry.
The Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry in 1999, after the recommendations of the Malhotra Committee report.
The IRDA was incorporated as a statutory body in April 2000.
The IRDA opened up the market in August 2000 with the invitation for application for registrations.
Foreign companies were allowed ownership of up to 26%, which is increased to 74% in the budget for the financial year 2021-22.
In December 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies.
Also, at the same time, GIC was converted into a national re-insurer.
Today there are 34 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies (Out of which 23 are active) operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP.