RESEARCH METHODOLOGY

Method of Research
The researcher has adopted a purely doctrinal method of research. The researcher has made
extensive use of the library at the INDIAN INSTITUTE OF LEGAL STUDIES and also the
internet sources.

Aims and Objectives:

The aim of the project is to present a detailed study of the THE DEVELOPMENT OF
INSURANCE LAW: THE ENGLISH AND INDIAN EXPERIENCES as per Insurance Law.

Sources of Data:
The following secondary sources of data have been used in the project1.

Books

2.

PRINCIPLES OF INSURANCE LAW

INSURANCE LAW AND PRINCIPLES
Websites

www.irdai.gov.in/ADMINCMS/
https://en.wikipedia.org/wiki/History_of_insurance

Method of Writing:
The method of writing followed in the course of this research paper is primarily analytical.
Mode of Citation:
The researcher has followed a uniform mode of citation throughout the course of this research
paper.

CONTENTS
1

SL
NO.

PAGE
TOPICS
NO.

INTRODUCTION

THE HISTORY AND EVOLUTION OF INSURANCE IN INDIA

DEVELOPMENT OF INSURANCE LAW IN INGLAND

5-6

DEVELOPMENT OF LAWS OF INSURANCE IN INDIA

7-8

ROLE OF REGULATORY AUTHORITY IN INDIA

CONCLUSION

10

BIBLIOGRAPHY

11

INTRODUCTION

Life is a roller coaster ride and is full of twists and turns. Human life is exposed to many risks,
which may result in heavy financial losses. Insurance is one of the devices by which risks may be
reduced or eliminated in exchange for premium. Insurance policies are a safeguard against the
uncertainties of life. As in all insurance, the insured transfers a risk to the insurer, receiving a
policy and paying a premium in exchange. The risk assumed by the insurer is the risk of death of
the insured in case of life insurance. Insurance policies cover the risk of life as well as other
assets and valuables such as home, automobiles, jewelry etc. On the basis of the risk they cover,
insurance policies can be classified into two categories:
(a) Life Insurance
(b)Non-Life Insurance or General Insurance
Life insurance products cover risk for the insurer against eventualities like death or disability.
Non-life insurance products cover risks against natural calamities, burglary, etc. Insurance is
system by which the losses suffered by a few are spread over many, exposed to similar risks.
With the help of Insurance, large numbers of people exposed to a similar risk make contributions
to a common fund out of which the losses suffered by the unfortunate few, due to accidental
events, are made good. Insurance is a protection against financial loss arising on the happening
of an unexpected event. Insurance policy helps in not only mitigating risks but also provides a
financial cushion against adverse financial burdens suffered.
Insurance is defined as a co-operative device to spread the loss caused by a particular risk over a
number of persons who are exposed to it and who agree to ensure themselves against that risk.
Risk is uncertainty of a financial loss.. Insurance provides financial protection against a loss
arising out of happening of an uncertain event. A person can avail this protection by paying
premium to an insurance company. A pool is created through contributions made by persons
seeking to protect themselves from common risk. Any loss to the insured in case of happening of
an uncertain event is paid out of this pool. Life insurance has come a long way from the earlier
days when it was originally conceived as a risk-covering medium for short periods of time,
covering temporary risk situations, such as sea voyages. As life insurance became more
established, it was realized what a useful tool it was for a number of situations that includes
temporary needs, threats, savings, investment, retirement etc. Insurance is a contract between
two parties whereby one party agrees to undertake the risk of another in exchange for
consideration known as premium and promises to pay a fixed sum of money to the other party on
happening of an uncertain event (death) or after the expiry of a certain period in case of life
insurance or to indemnify the other party on happening of an uncertain event in case of general
insurance. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose
risk is covered is known as the 'insured' or 'assured'.

THE HISTORY AND EVOLUTION OF INSURANCE

IN INDIA
3

In Indian scenario the roots of Insurance in India has their origin in the era of
Sage Manu (Rishi Manu) and later in Maurya Dynasty in the era of Kautilya who
has written the rules of Arthshastra (Economics). Manav Dharma Shastra
(Laws of Manu) of Manu contained rules for Sea-Form contracts which were
practised for doing international trade. In Kautilyas Arthshastra one of the
chapters has mentioned about the protection of State to the people against the
any natural calamity, theft or any act of Anti-Social-Elements. So, in this way
India has the origin of Insurance thousands of years back and later it has evolved
in present codified form in the Influence of English Rule which was prevailing all
over the world at one point of time.
Again Insurance in its current form has its history dating back until 1818,
when Oriental Life Insurance Company was started by Anita Bhavsar
in Kolkata to cater to the needs of European community. The pre-independence
era in India saw discrimination between the lives of foreigners (English) and
Indians with higher premiums being charged for the latter. In 1870, Bombay
Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded.
In the year 1912, the Life Insurance Companies Act and the Provident Fund Act
were passed to regulate the insurance business. The Life Insurance Companies
Act, 1912 made it necessary that the premium-rate tables and periodical
valuations of companies should be certified by an actuary. However, the disparity
still existed as discrimination between Indian and foreign companies. The oldest
existing insurance company in India is the National Insurance Company , which
was founded in 1906, and is still in business.

DEVELOPMENT OF INSURANCE IN ENGLAND

The need to protect individuals against changes in fortune is as old as civilisation. People
throughout the world and throughout history have developed different organisations and
structures, such as the Roman colleges and Anglo Saxon gilds, to guarantee mutual protection in
wealth and adversity1.
This brief history of the modern business of insurance focuses on how the industry developed
beyond these early protective organisations by examining the growth of specific insurance
organisations and the different forms of insurance they provided.

Marine insurance
The earliest identifiable class of insurance as a business was marine insurance. Early forms of
modern marine policies have been traced back as far as the Italian city states of Genoa and
Palermo in the 13th century. According to contemporary sources, marine insurance was available
in France, Spain, Italy, Flanders and England by 1500, and early forms of marine policies are
found in the records of the High Court of the Admiralty of England from 1547.

Fire insurance
Although pre-dated by marine business, fire insurance was the first to achieve corporate status.
Municipal or state-funded fire insurance originated in Germany in 1623, with the establishment
of the Great Werder Fire Fund in Prussia, but the first fire insurance companies were established
in England. Around 1681, the Fire Office was established in London by Dr Nicholas Barbon,
followed by the Friendly Society in 1683 and the Hand-in-Hand Fire & Life Insurance Society
(also known as the Contributors for insuring houses, chambers, or rooms, from loss by fire by
amicable contribution) in 1720.
Life assurance
Policies offering insurance on lives were available from the late 16th century. The earliest
recorded example in the UK dates from 1588 but, in other countries, such as the Netherlands and
1
5

France, insurance of lives was prohibited until much later. Life assurance as a corporate business
did not really develop until 1699 with the establishment in England of the Society of Assurance
for Widows and Orphans, followed a year later by the Second Society of Assurance for Widows
and Orphans, followed in 1706 by the Amicable Society.
The early societies insured a limited number of people, charging the same premium for each
member and fixing them within a narrow age range, typically between 12 and 45. Having been
turned down because his age fell outside this range, James Dodson developed a scientific
selection rating that based premiums on age and life expectation. This led, in 1762, to the
foundation of the Society for Equitable Assurances on Lives and Survivorships, which allowed
all types of lives to be insured.
Pensions and annuities
The 1706 charter of the Amicable Society permitted the company to grant annuities, although
these were not used in the way annuities are today. Starting in the first quarter of the 18th
century, annuity societies such as Beech Oil Annuities and the Brotherly Society of Annuitants
operated schemes intended to allow provision of an income for dependants. These schemes were
particularly recommended to those whose income was purely based on their profession rather
than on an estate or a business, which could be passed on through inheritance.

DEVELOPMENT OF LAWS OF INSURANCE IN

INDIA
The concept of insurance has been prevalent in India since ancient times amongst Hindus.
Overseas traders practiced a system of marine insurance. The joint family system, peculiar to
India, was a method of social insurance of every member of the family on his life. The law r
elating to insurance has gradually developed, undergoing several phases from nationalization of
the insurance industry to the recent reforms permitting entry of private players and foreign
investment in the insurance industry.
The Constitution of India is federal in nature in as much there is division of powers between the
Centre and the States. Insurance is included in the Union List, w herein the subjects included in
this list are of the exclusive legislative competence of the Centre. The Central Legislature is
empowered to regulate the insurance industry in India and hence the law in this regard is uniform
throughout the territories of India.

In the following manner the Indian Insurance Scenario has changed

gradually1938 This is the year when a comprehensive Act called The
Insurance Act, 1938 has been introduced.
1939 In this year the Insurance Rules were framed for effectuating
the Insurance Act.
1956 This year has witnessed a huge change in the Indian Insurance
Sector since the Government of India took over all life insurance
companies.
1968 In 1968 The Insurance Act, 1938 was amended to provide for
social control, minimum solvency margin and a Tariff Advisory
Committee (TAC) has also been established.
1972 This year witnessed the Nationalization of General Insurance
Companies
and
for
this General
Insurance
Business
(Nationalization) Act, 1972 was passed.
1973 The General Insurance Corporation of India (GIC) came
into existence as a Government Company.

1974 A year later 107 insurers practising General Insurance business

were grouped and merged to form four subsidiaries of GICs namely

National Insurance Co. Ltd.

The New India Assurance Co. Ltd.

The Oriental Insurance Co. Ltd.
United India Insurance Co. Ltd.
1991 The Public Liability Insurance Act 1991 and Public Liability
Insurance Rules 1991 were introduced as another milestone in the series of
Public Welfare Laws in India.1994 The Malhotra Committee submitted
its report in January 1994 (set up by Govt. in 1993 under Chairmanship of Shri
R.N. Malhotra, former Governor of RBI, to examine potential reforms that could
be undertaken in the insurance sector and complement them with reforms
initiated in the other sectors) submitted its report in January 1994 and
recommended establishment of a strong and effective insuranceregulatory
authority.
1998 Insurance Ombudsman Red ressal of Public Grievances Rules, 1998
were issued to provide Consumers a Forum with minimal formalities to get their
grievances resolved.
1999 This year has the great relevance in the history of Indian Insurance
Sector since based on the Malhotra Committee Report the Insurance
Regulatory and Development Authority (IRDA) was established to
regulate, promote and ensure orderly growth of the insurance and reinsurance
business in India.
2001 The year of 2001 brought another transformation in the Insurance
Business of India because in addition to the existing Government insurance
companies, Private Sector Companies were also licensed by IRDA to
conduct general insurance business in India.
2002 General
Insurance
Business
(Nationalization)
Amendment Act, 2002 was passed in which the important amendment was
that the subsidiaries of GIC were restructured as independent companies
and GIC
was
converted
into
National
Re-insurer.

2003 This year witnessed the introduction of Broker for first time in Indian
Insurance Market to boost up the business in more widened manner.
2015 The Insurance Laws (Amendment) Act, 2015 was passed to
increase the Ceiling of 26% FDI to 49% and in this manner the
Insurance Business in India has been widely opened for Foreign Giants of
Insurance.

ROLE OF REGULATORY AUTHORITY IN INDIA

The IRD Act has established the Insurance Regulatory and Development Authority (IRDA or
Authority) as a statutory regulator to regulate and promote the insurance industry in India and
to protect the interests of holders of insurance policies. The IRD Act also carried out a series of
amendments to the Act of 1938 and conferred the powers of the Controller of Insurance on the
IRDA2.
The members of the IRDA are appointed by the Central Government from amongst persons of
ability, integrity and standing who have knowledge or experience in life insurance, general
insurance, actuarial science, finance, economics, law, accountancy, administration etc. The
Authority consists of a chairperson, not more than five whole-time members and not more than
four part-time members.
Powers, Duty and Functions of the Authority
The Authority has been entrusted with the duty to regulate, promote and ensure the orderly
growth of the insurance and re-insurance business in India. In furtherance of this responsibility, it
has been conferred with numerous powers and functions which include prescribing regulations
on the investments of funds by insurance companies, regulating maintenance of the margin of
solvency,adjudication of disputes between insurers and intermediaries, supervising the
functioning of theTariff Advisory Committee, specifying the percentage of premium income of
the insurer to finance schemes for promoting and regulating professional organizations and
specifying the percentage of life insurance business and general insurance business to be
undertaken by the insurer in the rural or social sector.

2
9

CONCLUSION
Life is a roller coaster ride and is full of twists and turns. Human life is exposed to many risks,
which may result in heavy financial losses. Insurance is one of the devices by which risks may be
reduced or eliminated in exchange for premium. Insurance policies are a safeguard against the
uncertainties of life. As in all insurance, the insured transfers a risk to the insurer, receiving a
policy and paying a premium in exchange. The risk assumed by the insurer is the risk of death of
the insured in case of life insurance. Insurance policies cover the risk of life as well as other
assets and valuables such as home, automobiles, jewelry etc.
The need to protect individuals against changes in fortune is as old as civilisation. People
throughout the world and throughout history have developed different organisations and
structures, such as the Roman colleges and Anglo Saxon gilds, to guarantee mutual protection in
wealth and adversity.
This brief history of the modern business of insurance focuses on how the industry developed
beyond these early protective organisations by examining the growth of specific insurance
organisations and the different forms of insurance they provided.
Insurance is a co-operative device of distributing losses, falling on an individual or his family
over large number of persons each bearing a nominal expenditure and feeling secure against
heavy loss.
Insurance may be defined as a contract consisting of one party (the insurer) who agrees to pay to
other party (the insured) or his beneficiary, a certain sum upon a given contingency against
which insurance is sought. Insurance is a contract in which a sum of money is paid by the
assured in consideration of the insurer's incurring the risk of paying larger sum upon a given
contingency. In its legal aspects it is a contract whereby one person agrees to indemnify another
against a loss which may happen or to pay a sum of money to him on the occurring of a
particular event.
10

This is the mode by which Indian Insurance Business has transformed and
now it is waiting for the Insurers of the World, with widely opened arms, to
come up with better ideas of Assuring People that yes in all odd situations
Insurance are there to protect ones Interest.

BIBLIOGRAPHY
Primary Source
Prudential Insurance Company of England, ed. The Documentary
History of Insurance, 1000 B. C. - 1875 A. D. (1915)
GOI. "IRDA ACT 1999"
M.N. SRINIVASAN, PRINCIPLES OF INSURANCE LAW,
RAMANIYA PUBLISHERS
SACHIN RASTOGI , INSURANCE LAW AND PRINCIPLES,YEAR
2014

Secondary Source

http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Insurance_Law__Regulations_in_India.pdf
https://nls.ac.in/resources/ded/.../1-DevelopmentofInsuranceLaw.pdf
www.jstor.org/stable/1109564
https://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx
www.randmark40.com/index.php?option=com_content&view
https://www.google.co.in/url?sa
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https://Insurance_Law_-_Regulations_in_India.pdf

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