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History of Insurance in India

Insurance since Ancient times

In India, Insurance has well established history of more than thousand years. In Rigveda, there is a concept called
Yogakshema, which means prosperity, well being and security of people.
Also Insurance was mentioned in Manusmrithi, Dharmashastra and Arthashastra. In those times insurance refers to pooling
of resources that could be re-distributed in times of natural calamities such as fire, floods, epidemics and famine.
This was probably a pre-cursor to modern day insurance.

Modern Day Insurance

The modern form of Life Insurance came to India from England in the year 1818. Oriental Life Insurance Company started by
Europeans in Calcutta was the first life insurance company on Indian Soil.
The insurance companies established during that period were brought up with the purpose of looking after the needs of
European community and Indian natives were not being insured by these companies.
However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started
insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged
on them.
Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and
covered Indian lives at normal rates. Bharat Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies such as The United India in
Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore.

Life Insurance Companies Act, 1912

In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. 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. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies
at a disadvantage.

Insurance Act1938

From 44 companies with total business-in-force as Rs.22.44 Crores, it rose to 176 companies with total business-in-force as
Rs.298 Crores in 1938. With a view to protect the interests of the Indian Insurance companies, the earlier legislation was
amended with the enactment of the Insurance Act 1938, which consists comprehensive provisions for effective control over
the activities of insurers or insurance organizations.
The Insurance Act 1938 was the first legislation governing the life insurance and non-life insurance and to provide strict state
control over insurance business. The Insurance Act has 120 sections and 8 schedules. It was borrowed from British law.

Birth of Life Insurance Corporation of India

On 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian
companies and 75 provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an
Ordinance, and later, the ownership too by means of a comprehensive bill.
The Parliament of India passed the Life Insurance Corporation Act on June 1956, and the Life Insurance Corporation of India
was created on September 1956, with the objective of spreading life insurance much more widely and in particular to the
rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable
cost.

The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

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History of General (non-life) Insurance

The history of general insurance dates back to the Industrial Revolution in the west during the 17th century. General
Insurance in India has its roots in the establishment of Triton Insurance Company Ltd. at Kolkata in the year 1850 by the
Britishers. In 1907, the Indian Mercantile Insurance Ltd. was established and was the first company to transact
all classes of general insurance business.
In 1957, General Insurance Council (GIC), a wing of the Insurance Associaton of India was established The General Insurance
Council framed a code of conduct for ensuring fair conduct and sound business practices across Non-Life or General
insurance sector.
In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory
Committee was also established in the same year.
With the passing of the General Insurance Business (Nationalization) Act in 1972, general insurance business was
nationalized. A total of 107 insurers were amalgamated and grouped into four companies namely National Insurance
Company Ltd. at Kolkata, the New India Assurance Company Ltd. at Mumbai, the Oriental Insurance Company Ltd at New
Delhi and the United India Insurance Company Ltd at Chennai.

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