History of Insurance, History of Insurance in India, History of General Insurance, History of General Insurance in India, History of Insurance in World, history of insurance business in India
History of Insurance in the World & in India
- Over 5000 years back, Chinese traders used insurance as a preventive measure against piracy. The cargo of each ship used to be distributed among other ships, so that if one ship gets lost or captured by pirates the loss would only be partial.
- The first written insurance policy was on a Babylonian obelisk monument with the code of King Hammurabi. The Hammurabi Code was one of the first forms of written laws. The basic insurance gave the Babylonian traders protection against loss of cargo.
- In 1666, the Great Fire of London destroyed more than 13000 houses. To counter such events in future, Fire Office, the first fire insurance company was started in 1680.
- Traders in London used to gather at Lloyd's Coffee House and agree to share losses of goods due to piracy or the ship sinking due to bad weather or other reasons.
- 1818 saw the advent of the 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, of 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, to protect the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, of 1938.
- 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 the insurance business.
- An Ordinance was issued on 19th January 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year.
- The LIC absorbed 154 Indian, and 16 non-Indian insurers as also 75 provident societies-245 Indian and foreign insurers in all.
- The LIC had a monopoly till the late 90s when the Insurance sector was reopened to the private sector.
- The history of general insurance dates back to the Industrial Revolution in the West and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation.
- General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British.
- In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business.
- 1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.
- In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January 1973. 107 insurers 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 commence business on January 1st 1973.
- The process of re-opening the sector had begun in the early 1990s and the last decade and more has seen it opened up substantially.
- In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.
- The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry.
- Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry.
- The IRDA was incorporated as a statutory body in April 2000. The key objectives of the IRDA include the promotion of competition to enhance customer satisfaction through increased consumer choice and lower premiums while ensuring the financial security of the insurance market.
- 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°/o.
- 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 34 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country.
Very helpful information
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