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1.1. History of General Insurance in India Pre Nationalization Era

The history of general insurance in India dates back to the 17th century with the growth of trade between India and other countries. General insurers from Britain and other countries carried out business in India. In the early 1970s, there were around 100 Indian insurers but malpractices had crept in. In 1971, the government took over all private insurers to protect public funds. In 1972, general insurance was nationalized and the General Insurance Corporation of India was set up with four subsidiaries to conduct business. Liberalization began in 1999 with the establishment of the Insurance Regulatory Authority, which separated life, non-life and reinsurance businesses and allowed private companies to enter the sector.

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129 views

1.1. History of General Insurance in India Pre Nationalization Era

The history of general insurance in India dates back to the 17th century with the growth of trade between India and other countries. General insurers from Britain and other countries carried out business in India. In the early 1970s, there were around 100 Indian insurers but malpractices had crept in. In 1971, the government took over all private insurers to protect public funds. In 1972, general insurance was nationalized and the General Insurance Corporation of India was set up with four subsidiaries to conduct business. Liberalization began in 1999 with the establishment of the Insurance Regulatory Authority, which separated life, non-life and reinsurance businesses and allowed private companies to enter the sector.

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1.1.

History of General Insurance in India

1.6.1. Pre Nationalization Era

The history of general insurance dates back to the industrial revolution in the
western countries and the growth of sea-faring trade and commerce during
the 17th century. The concept of general insurance came to India during the
British rule. General insurers from Britain and other countries carried out the
general insurance business.

The development of General Insurance Business in India can be summarized as


follows:

a) In 1928, the Indian Insurance Companies Act was passed to enable the

government to collect statistical information about both life and non-


life insurance business transacted in India by Indian and foreign
insurers including provident insurance societies.
b) In 1938, the Indian Insurance Companies Act was consolidated and

amended by the Insurance Act 1938 to protect the interests of the


public.
c) The Insurance Act of 1938 was amended in 1950, which resulted in

far-reaching changes in the insurance sector. These included a statutory


requirement of equity capital for companies carrying on insurance
business, ceiling on share holdings in such companies, stricter control
on investments, submission of periodical returns relating to
investments and such other information to the controller. The
controller could also call for appointment of administrators and put a
ceiling on expenses of management and agency commission for
mismanaged companies.
d) By early 1970s, there were about 100 Indian insurers carrying on the
general insurance business in India.
e) Malpractices and mismanagement had crept into the management of

these companies. Some insurance companies either liquidated or


cheated the policy holders. There were complaints of falsification and
denial of claims, interlocking of funds and other malpractices by many
insurance companies.
1.6.2. Post Nationalization Era

To protect public funds, the government started considering nationalization


of the Insurance Industry. In 1971, as a prelude to nationalization the general
insurance industry, the Govt of India took over the management of all private
general insurance companies.

In the year 1972 General Insurance Business was nationalized. The main
objective of this nationalization was to channelize the insurance funds for the
benefit of the community at large.

With the enactment of General Insurance Act 1972, General Insurance


Corporation of India (GIC) was set up as a Holding Company. It had four
subsidiaries: New India, Oriental, United India and National Insurance
Companies.

GIC was responsible for broad policy matters that could affect the general
insurance industry in India. The company did not offer any direct insurance
policies except the aviation insurance policies of Air India, Indian Airlines,
Hindustan Aeronautics and Crop insurance.

Thus General Insurance business was primarily conducted by the four subsidiaries
of GIC.

Apart from the four subsidiaries, GIC set up the GIC Asset Management
Company to manage the GIC Mutual Fund, GIC Housing Finance, and
Export Credit Guarantee Corporation.

1.2. Present Structure of General Insurance in India


1.7.1. Liberalization of Insurance Sector in India

Although Indian Economy started opening up both to private sector and to


foreign investment in the year 1991, Insurance sector still remained the
domain of Govt of India.

The setting up of Insurance Regulatory Authority (IRDA) in the year 1999


paved the way for liberalization and privatization of Insurance Sector to
private sector.

IRDA has separated out Life, Non Life and Reinsurance business. Therefore
a company has to have separate licenses for each line of business.
Recently the limit of Foreign Investment in Insurance Business has been
increased from 26% to 49% something that was under discussion for more
than a decade. Also global re insurance companies have been able to set up
branches in India, something that was not allowed earlier.

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