“If risk is like a smouldering coal that may spark a fire at any moment, then insurance is our fire extinguisher”. Countries and their citizens need something to spread risk among large number of people and to move risk to entities that can handle it. This is how insurance emerged.
History of insurance in India can be broadly bifurcated into three eras:
Life insurance was the 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 insurer.
Life insurance was the first to be nationalised in 1956. General insurance followed suit and was nationalised in 1973. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of Mr. RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.
The primary regulator for insurance in India is the insurance regulatory and development authority of India (IRDAI) that was formed in 1999 on the recommendations of Malhotra committee report. The key objectives of the IRDA include-
1-Promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums
2-Ensuring the financial security of the insurance market
The IRDA opened up the market in august 2000 with the invitation for application for registration. Foreign companies were allowed ownership of up to 26%. Just recently, the FDI in Indian insurance companies has been increased up to 50%
Acts, Rules and Regulations
The Indian life assurance companies act 1912 was the first statutory measure to regulate life business being transacted in India .in 1938, with a view to protect the interests of Indian insurance companies ,the earlier act was amended. After independence government of India decided to standardise and nationalise the practice of insurance business because there were allegations of unfair trade practices being prevalent to a great extent. An ordinance was issued on 19th Jan 1956 for nationalisation of life insurance and LIC came into existence in the same year. Also with passing of general insurance business (nationalisation) act 1972 General (non-life) insurance was nationalised and general insurance corporation (GIC) was incorporated as a company.
LIC had monopoly till late 90s when the insurance sector reopened to private sector. Liberalisation of Indian insurance market was recommended in a report released in 1994 by RN Malhotra committee according to that Indian market should be opened to private sector competition, and ultimately, foreign private sector. IRDA act 1999 made it possible, as per provisions of this act:
- Company is formed and registered under companies act 1956
- The aggregate holding of equity shares by a foreign company do not exceed 26%
- Company sole purpose is to carry on life business or general business or reinsurance
- The minimum paid up equity capital for life or general business is Rs. 100 Crores
- The authority has notified 27 regulations and has its head quarter at Hyderabad.
- Life Insurance Corporation of India
- New India Insurance Co. Ltd.
- National Insurance Company Ltd.
- The Oriental Insurance Company Ltd.
- United India Insurance Company Ltd.
- Agriculture Insurance Company of India Ltd.
The top 10 insurance companies in India have left their indelible mark on the industry with their sheer presence, growth as well as pioneering services, range of products, and overall financial achievements. Many of these companies have also attained top positions in the industry thanks to their efforts at workforce development and contribution to the Indian insurance industry in general.
Leading Insurers in India
Following are the leading insurers in India:
- Tata AIG General Insurance
- Bajaj Allianz General Insurance
- New India Assurance
- ICICI Prudential Life Insurance
- IFFCO TOKIO General Insurance
- ICICI Lombard General Insurance
- Oriental Insurance
- Birla Sun Life Insurance
- HDFC Standard Life Insurance