Evolution 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).

The writings talk in terms of pooling of resources that could be re-distributed in times of
calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to
modern day insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers’ contracts. Insurance in India
has evolved over time heavily drawing from other countries, England in particular.

The advent of life insurance business in India

1818
Advent of life insurance business in India

1818 saw the advent of life insurance business in India with the establishment of the
Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In
1829, the Madras Equitable had begun transacting life insurance business in the Madras
Presidency. 1870 saw the enactment of the British Insurance Act and in the last three
decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire
of India (1897) were started in the Bombay Residency. This era, however, was dominated
by foreign insurance offices which did good business in India, namely Albert Life
Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices
were up for hard competition from the foreign companies..

1914
Government of India started publishing returns

In 1914, the Government of India started publishing returns of Insurance Companies in

India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to
regulate life business. In 1928, the Indian Insurance Companies Act was enacted to
enable the Government to collect statistical information about both life and non-life
business transacted in India by Indian and foreign insurers including provident insurance
societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier
legislation was consolidated and amended by the Insurance Act, 1938 with
comprehensive provisions for effective control over the activities of insurers.

1950
The Insurance Amendment Act of 1950 abolished Principal Agencies

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were
a large number of insurance companies and the level of competition was high. There
were also allegations of unfair trade practices. The Government of India, therefore,
decided to nationalize insurance business..

1956
Life Insurance Corporation came into existance

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector
and Life Insurance Corporation came into existence in the same year. The LIC absorbed
154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign
insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was
reopened to the private sector.

The history of general insurance

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. It came to
India as a legacy of British occupation.

1850
The British establish the Triton Insurance Company Ltd

General Insurance in India has its roots in the establishment of Triton Insurance
Company Ltd., in the year 1850 in Calcutta by the British.
1907
The Indian Mercantile Insurance Ltd, was set up

In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to
transact all classes of general insurance business.

1957
General Insurance Council is formed

1957 saw the formation of the General Insurance Council, a wing of the Insurance
Association of India. The General Insurance Council framed a code of conduct for
ensuring fair conduct and sound business practices.

1968
Insurance Act was amended

In 1968, the Insurance Act was amended to regulate investments and set minimum
solvency margins. The Tariff Advisory Committee was also set up then.

1973
General insurance business was nationalized

In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general
insurance business was nationalized with effect from 1st January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company
Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the
United India Insurance Company Ltd. The General Insurance Corporation of India was
incorporated as a company in 1971 and it commence business on January 1st 1973.

The process of re-opening

This millennium has seen insurance come a full circle in a journey extending to nearly
200 years. The process of re-opening of the sector had begun in the early 1990s and the
last decade and more has seen it been opened up substantially. In 1993, the Government
set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to
propose recommendations for reforms in the insurance sector.The objective was to
complement the reforms initiated in the financial sector. The committee submitted its
report in 1994 wherein , among other things, it recommended that the private sector be
permitted to enter the insurance industry. They stated that foreign companies be
allowed to enter by floating Indian companies, preferably a joint venture with Indian
partners.

April, 2000
The IRDA was incorporated as a statutory body

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body
to regulate and develop the insurance industry. The IRDA was incorporated as a statutory
body in April, 2000. The key objectives of the IRDA include promotion of competition so as
to enhance customer satisfaction through increased consumer choice and lower
premiums, while ensuring the financial security of the insurance market.

August 2000
The IRDA opened up the market

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%. The Authority has
the power to frame regulations under Section 114A of the Insurance Act, 1938 and has
from 2000 onwards framed various regulations ranging from registration of companies
for carrying on insurance business to protection of policyholders’ interests.

December, 2000
the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies
In December, 2000, the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies and at the same time GIC was converted into a
national re-insurer.

July, 2002
Parliament passed a bill de-linking the four subsidiaries from GIC in July,
2002.

Today there are 34 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 24 life insurance companies 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. A
well-developed and evolved insurance sector is a boon for economic development as it
provides long- term funds for infrastructure development at the same time
strengthening the risk taking ability of the country.

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