Friday, January 15, 2010

History of Insurance in India

In 19th century India, insurance business started with Life Insurance. It was the time when British officials on their postings in India felt the need of life insurance cover. Year 1818, in India, witnessed Life Insurance being initiated and transacted by an English company, The Oriental Life Insurance Company Ltd. Then it was Madras Equitable which came into insurance business in 1829.

Thereafter British Insurance Act was enacted in 1870. The English Company 'The European and the Albert' pioneered and took care of the needs of British officials. The first Indian insurance company, Bombay Mutual Assurance Society Ltd., was formed in 1870 in Mumbai. This followed by the Bharat Insurance Company in 1896 in Delhi, Empire of India in 1897 in Mumbai, United India in Chennai, National Indian and Hindustan Co-operative in Kolkata.

In the wake of the Swadeshi Movement in India in the early 1900s, quite a good number of Indian companies were formed in various parts of the country to transact insurance business as the perceived threat level gained height during this period. The Co-operative Assurance was established in Lahore, Bombay Life (originally called the Swadeshi Life), Indian Mercantile, New India and Jupitor in Mumbai and Lakshmi Insurance in New Delhi.

During the first half of the 20th century insurance business in India went through few acts and regulations that were aimed at streamlining the business to strike a balance between the interests of the insurers and the policy holders. But this could not bring much relief.

This made Government of India to nationalise life insurance business in the year 1956. Life Insurance Corporation of India (LIC) was formed on 1st September, 1956 through an act passed by the parliament. At that time, there were 245 private companies (consisting of 170 companies and 75 provident fund societies) transacting life insurance business in India. LIC steered the business of insurance in a manner that proved to be a mutually-benefitting relationship between insurer and policy holder. LIC spread its network across the width and depth of the country and ventured overseas too. The contribution of LIC in the growth of the country is phenomenal.

On the other side, the General Insurance business also passed through various regulations before the enforcement of the act called General Insurance Business (Nationalisation) ACT 1972. Through this act acquisition and transfer of shares held by Indian insurance companies and undertakings took place which 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 commenced business on January 1st 1973.

This scenario prevailed till the economic reforms started taking place and the socio-economic transition touched India to face the challanges of the new era.

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