Insurance in India
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Insurance is a federal subject in India and has history dating back till 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP.[1]. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government.
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[edit] History of Insurance in India
Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company started was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates.
At the dawn of the twentieth century, insurance companies started mushrooming up. 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 disparage still existed as discrimination between Indian and foreign companies.
[edit] Related Acts
The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts, with the first one being the Insurance Act, 1938.
[edit] The Insurance Act, 1938
The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.
[edit] Life Insurance Corporation Act, 1956
Even though the first legislation was enacted in 1938, it was only in 19th of January, 1956, that life insurance in India was completely nationalized, through the Life Insurance Corporation Act, 1956. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1st September, 1956, as a result and has grown to be the largest insurance company in India as of 2006.[2]
[edit] General Insurance Business (Nationalisation) Act, 1972
The General Insurance Business (Nationalisation) Act, 1972 was enacted to nationalise the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, United India Insurance which were headquartered in each of the four metropolitan cities.[3]
[edit] Insurance Regulatory and Development Authority (IRDA) Act, 1999
Till 1999, there were not any private insurance companies in the Indian insurance sector. The Govt. of India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. [4]
[edit] Notes
- ^ John, J. 2006. 'Profile on India - Gearing Up To New Horizons', Asia Insurance Review, March 2006, Factiva Document AIR0000020060321e23k0000d accessed on 29 April, 2006.
- ^ History of Insurance in India, http://www.licindia.com/history.htm accessed on 29 April, 2006
- ^ Regulation of General Insurance in India, Insurance in India, accessed on 29 April, 2006.
- ^ Indian Insurance Sector, EconomyWatch page accessed on 29 April, 2006.
