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.
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.
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.
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.
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. 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. Parliament passed a bill de-linking the four
subsidiaries from GIC in July, 2002.
Today there are 28
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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