Begining of Insurance in India
Insurance began in India around 1800 AD. In 1818 the first life insurance company on Indian Soil started functioning. Company Name was “Oriental Life Insurance”.
In 1870, the first Indian life insurance company started its business. Bombay Mutual Life Assurance Society.
In 1912 the Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
In 1928 the Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and Non-life insurance businesses.
In 1938 earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the Insuring public.
In 1956 nationalization of life insurance: Life insurance business was nationalized on 1st September 1956 and the Life Insurance Corporation of India (LIC) was formed through LIC Act, 1956. A capital contribution of 5Cr from the Government of India was also made. There were 170 companies and 75 provident fund societies doing life insurance business in India at that time. From 1956 to 1999, the LIC held exclusive rights to do life insurance business in India.
In 1972 nationalization of non-life insurance: With the enactment of General Insurance Business Nationalization Act (GIBNA) in 1972, the non-life insurance business was also nationalized and the General Insurance Corporation of India (GIC) and its four subsidiaries were set up. At that point of time, 106 insurers in India doing non-life insurance business were amalgamated with the formation of four subsidiaries of the GIC of India.
Indian Insurance Sector moved ahead
The formation of the Malhotra Committee in 1993 initiated reforms in the Indian insurance sector and is considered as one of the milestones in the history of Insurance in India.
The aim of the Malhotra Committee was to assess the functionality of the Indian insurance sector. This committee was also in charge of recommending the future path of insurance in India.
The Malhotra Committee attempted to improve various aspects of the insurance sector, making them more appropriate and effective for the Indian market.
The Insurance Regulatory and Development Authority Act of 1999 brought about several crucial policy changes in the insurance sector of India. It led to the formation of the Insurance Regulatory and Development Authority (IRDA) in 2000.
The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to initiate different policy measures to help sustain growth in the Indian insurance sector.
Important Milestones in the history of Indian Insurance industry
1993 Malhotra Committee established.
1994 Recommendations of Malhotra Committee published.
1995 Mukherjee Committee established.
1996 Setting up of (interim) Insurance Regulatory Authority (IRA) Recommendations of the IRA.
1997 Mukherjee Committee Report submitted but not made public.
1997 The government gives greater autonomy to Life Insurance Corporation, General Insurance Corporation, and its subsidiaries with regard to the restructuring of boards and flexibility in investment norms aimed at channeling funds to the infrastructure sector.
1998 The cabinet decides to allow 40 percent foreign equity in private insurance companies—26 percent of foreign companies and 14 percent of non-resident Indians and Foreign Institutional Investors.
1999 The Standing Committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26 percent. The IRA bill is renamed the Insurance Regulatory and Development Authority Bill.
1999 Cabinet clears Insurance Regulatory and Development Authority Bill.
2000 President Gives assent to the Insurance Regulatory and Development Authority Bill.
Life insurance industry today
Currently, 24 life insurance companies and 29 non-life insurance companies in the Indian market compete with each other on price and service to attract customers. Out of the 24 life insurance companies, Life Insurance Corporation of India (LIC) is the sole public sector company fully owned by Government of India. All the policies issued by LIC of India enjoys the Sovereign guarantee of Indian Parliament.
The country’s insurance market is expected to quadruple in size over the next 10 years from its current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$ 160 billion.
The general insurance business in India is currently at Rs 78,000 crore (US$ 11.7 billion) premium per annum industry and is growing at a healthy rate of 17 per cent.
India’s insurance market lags behind other economies in the baseline measure of insurance penetration. At only 3.9 percent, India is well behind the 11.9 percent for Korea, 11.5 percent for the UK, 11.1 percent for Japan, and 7.5 percent for the US. Indian Insurance Industry is expected to grow to US $ 280 billion by Financial Year 2020.
The Indian insurance market is considered to have a huge business opportunity waiting to be harnessed. India currently accounts for less than 1.5 per cent of the world’s total insurance premiums and about 2 per cent of the world’s life insurance premiums despite being the second most populous nation.