History of Indian Insurance Industry
Information regarding insurance is available in Indian texts. If these texts are considered as the basis, it can be said that the people of India have been adopting the insurance system since ancient times. The names of some of the texts in which insurance is mentioned are – Manu (Manusmriti), Yajnavalkya (Dharmashastra) and Kautilya (Arthashastra).
The primary form of insurance in Indian society is considered to be to deal with disasters like fire, flood, epidemic and famine. According to the oldest Indian history, there is evidence from which it is estimated that insurance contracts were first introduced in India to protect against losses in maritime trade. India was ruled by England for a long period, as a result of which insurance in India has evolved over time, particularly under the influence of England.
Development of Insurance Industry in India-
Life insurance company was first established in India in 1818. The name of this company was Oriental Life Insurance Company and was established in the city of Calcutta, India. However, the company failed in 1818 for some reasons.
In the year 1829, the Madras Equital started a life insurance business at the Madras Presidency. The British Insurance Act was enacted in 1870 and Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were launched in the Bombay Residency in the last three decades of the nineteenth century.
However, it was a period when the offices of foreign companies were in a state of disgrace. These foreign companies did good insurance business in India. In this era of time, Indian insurance companies had to compete with foreign companies.
Government of India Started Publishing Returns-
In 1914, the Government of India began publishing articles or returns of insurance companies based in India. These articles used to provide information about various types of financial and business activities of insurance companies, which could have understood and controlled the insurance and financial aspects associated with it. This made a way to support the public and financial situation.
Indian Life Assurance Company Act-1912 was the first law to control life insurance business. In 1928, the Indian Insurance Company Act was enacted, so that the government could collect detailed information about the life insurance business and non-life insurance insurance business conducted by Indian and foreign insurance companies in India.
Till 1938, the government had no major control over the works of insurance companies. Due to which the insurance companies were doing their business with arbitrary churning. A law called an Insurance Act-1938 was enacted to protect public interests and to effectively control the activities of insurance companies.
The Insurance Amendment Act, 1950
By the year 1950 there were many insurance companies in India and were struggling to improve their business. Due to which the level of competition in these companies was high. This was the time when companies were also facing allegations of unfair trade exercises.
For this, the Government of India implemented the Insurance Amendment Act 1950 and the major agencies were abolished. During this time period, the Government of India had made up its mind to nationalize the insurance business.
Life Insurance Corporation came into existence
On January 19, 1956, an ordinance was issued by the Government of India, in which it was proposed to nationalize the life insurance sector. As a result, Life Insurance Corporation of India was established on 01 September 1956. Which was later also known as LIC and LIC of India.
Prior to September 01, 1956, about 75 Committee Society, 154 Indian insurance company and 16 other insurance companies were doing their insurance business in India. At the time of the establishment of Life Insurance Corporation of India, all these insurance companies were merged with LIC of India.
The only company of Life Insurance Corporation of India, which was trading in the field of life insurance for a long period in India, was the same. In the late 90s, once again private sector companies were allowed to do business in the Indian insurance market.
The history of General Insurance
The history of General Insurance developed as a result of the Industrial Revolution in the Western world and the 17th-century sea-faring trade and commerce. It came to India as a legacy of British rule.
Establishment of British Triton Insurance Company Limited-
The beginning of General Insurance in India is believed to be from the establishment of Triton Insurance Company Limited. The company was established by British rule in 1850 in the city of Kolkata.
Establishment of Indian Mercantile Insurance Limited-
In 1907, the Indian Mercantile Insurance Limited was established. This was the first company to operate all types of General Insurance Businesses.
Formation of General Insurance Council
In 1957, the General Insurance Council was formed, which was part of the Insurance Association of India. The General Insurance Council formed a code of conduct, which was aimed at justified conduct and safe commercial practices.
Amendment of Insurance Act
In 1968, it was revised to regulate investments under the Insurance Act and set a minimum solvency margin. At the same time, Tariff Advisory Committee was also established.
Nationalization of General Insurance Business-
In 1972, the General Insurance Business was nationalized on 1 January 1973, passing by the General Insurance Business (Nationalization) Act. 107 insurance companies were integrated and enriched in four companies, including National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited and United Insurance Company Limited. The General Insurance Corporation of India was included in 1971 as a company and started the trade on 1 January 1973.
Improvement in insurance system-
This century has seen the completion of a journey of almost 200 years in the field of insurance. The process of reforming the insurance system began in the early 1990s and in recent times, considerable efforts have been made to reform the system.
In 1993, the government constituted a committee under the chairmanship of RN Malhotra, former Governor of the Reserve Bank of India, to submit recommendations for reforms in the insurance sector. Its objective was to assess the reforms initiated in the financial sector and make suggestions for future prospects.
This committee submitted its report to the Government of India in 1994. Many suggestions were included in this report and it was also suggested that the private sector be allowed to enter the insurance industry. He said that foreign companies should be allowed to enter by forming joint ventures with Indian companies.
Accepting these recommendations, the Government of India decided to amend the Insurance Act-1938 and the Insurance Act-1999 was implemented. Which allowed the private sector and foreign companies to enter the insurance industry. After this, many private and foreign insurance companies started their insurance business in India.
Reforms in the insurance sector have resulted in increased insurance penetration and offering of more innovative and customer-centric products and services. This has made the Indian insurance industry more competitive globally.
In simple terms, reforms in the insurance sector mean that now you have more choice of insurance plans and you can choose one that suits your needs and budget. Now insurance companies are also more customer-centric than before and they are trying to provide better services to their customers.
To Develop IRDA as a Statutory Body-
After the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was formed as an autonomous body to regulate and develop the insurance industry. IRDA was included in April 2000 as a statutory body. Major objectives of IRDA include: promoting competition to increase customer satisfaction, through increase in consumer's choice and premium, while ensuring financial security of the insurance market.
Open Market System-
IRDA opened the market by inviting applications for registration in August 2000. Foreign companies were allowed ownership of up to 26%. The authority has the power to make regulations under Section 114A of the Insurance Act, 1938 and since the year 2000 they have made several statutes, ranging from registration of companies to carry on insurance business to protection of the interests of policyholders.
Reorganization of Subsidiary Insurance Companies as Independent Companies-
In December 2000, the subsidiaries of the General Insurance Corporation of India were reorganized as independent companies and at the same time GIC was transformed into a national reinsurance company.
Bill to Separate Four Subsidiaries from GIC-
Today there are about 34 general insurance companies in the countrIn simple language, IRDA is a government body that regulates the insurance industry and ensures that insurance companies treat their customers fairly. IRDA has opened up the insurance market so that more companies can provide insurance products and services and customers can choose from more options.y, including ECGC and Agricultural Insurance Corporation of India and 24 other life insurance companies.
Insurance sector is a huge sector and is growing at a rapid rate of 15-20%. Along with banking services, insurance services add about 7% to the country's GDP. A well-developed and developed insurance sector is a boon for economic growth as it provides long-term funds for infrastructure development as well as strengthens the risk appetite of the country.