Life insurance is an organised economic activity came into force in different countries at different stages of history.
Records show that first policy providing temporary life assurance cover for a period of 12 months was issued on 18th June 1583 AD in London on the life of William Gybbons and the policy was procured by Richard Martin. The policy was Underwritten by 16 individuals for £383-6s-8d with a premium of £30-13s-4d @ 8%. The insured died on 25th May 1584 i.e. within one year of taking the policy. The underwriters disputed the claim taking the plea that the party had lived for more than 12 lunar months (month of 28 days). However the claim was finally paid after the matter was taken to the court, which ruled in favour of the insured.
The “Amicable Society” started granting fluctuating sum on death since 1705 and a fixed sum since 1757.
With gathering of mortality tables (death rate per 1000 at each age up to the age of 100 years), Life Insurance activity became some what scientific. “Equitable society” was founded in 1762 and worked on a scientific basis.
By 1885 there were more than 50 British and other foreign agencies having their offices in India. The success of the Managing Agents encouraged the growth of many Insurance offices largely with foreign capital many of which were short lived.
In India Two British Companies - the European and the Albert entered in 1870 and attempted writing business on Indian lives. The first Indian Life assurance Society was formed in the same year called “Bombay Mutual Assurance Society Ltd.”
It was followed by “Oriental Life Assurance Society Ltd.” in 1874, “Bharat” in 1896 and “Empire of India” in 1897.
The New India, Vulcan, Jupiter, British India General and the Universal. These five were composite and dealing both in life and general Insurance.
The Swadeshi Movement of 1905 and Mahatma Gandhis’ call to Indians to give their business only to Indian Companies gave a boost to these new companies and they consolidated their position. More Indian companies entered the Life Insurance sector namely Hindustan Co-operative, United India, Bombay Life, National and Laxmi. But the going was not easy as they had little experience in the field of Insurance and they had to compete with 150 foreign offices including some of the largest Insurance groups in the world.
By 1955, 170 Insurance offices and 80 P.F. Societies registered companies were doing Life Insurance business in India. In view of surge in malpractices in Life Insurance business, due to the illiteracy level being high and lack in will for penetration/ spread of Life Insurance business, it was nationalised by Government of India and LIC Act was passed in June’1956, and this Act came into force from 1.9.1956.
Similarly the general insurance (which deals with non-life business i.e insurance of property) also nationalized in 1972 after merging of 55 Indian and 52 non Indian companies were nationalized by forming four general insurance companies.
The Govt. Of India, while liberalizing the Indian economy, also felt the liberalization of insurance sector because of lower penetration of insurance as compared to Indian population and its size and other developing countries. Initially the Govt. formed a Malhotra committee in 1993 to study whether the insurance sector should be opened for private players. The committee recommended to Liberalized, Privatized And Globalize (LPG) the insurance sector. In 1999, the Authority known as Insurance Regulatory & Development Authority through IRDA Act 1999 was formed.
After 44 years and 27 years of monopoly of life and general insurance respectively was broken.
Liberalisation of Insurance industry will undoubtedly benefit Indian economy, the Govt., Industry, Employee, Consumer & Society in the following manner:
Benefits to Economy
Benefits to Government
Benefits to Industry
Benefits to Consumer
Benefits to Employee
Benefits to Society
Records show that first policy providing temporary life assurance cover for a period of 12 months was issued on 18th June 1583 AD in London on the life of William Gybbons and the policy was procured by Richard Martin. The policy was Underwritten by 16 individuals for £383-6s-8d with a premium of £30-13s-4d @ 8%. The insured died on 25th May 1584 i.e. within one year of taking the policy. The underwriters disputed the claim taking the plea that the party had lived for more than 12 lunar months (month of 28 days). However the claim was finally paid after the matter was taken to the court, which ruled in favour of the insured.
The “Amicable Society” started granting fluctuating sum on death since 1705 and a fixed sum since 1757.
With gathering of mortality tables (death rate per 1000 at each age up to the age of 100 years), Life Insurance activity became some what scientific. “Equitable society” was founded in 1762 and worked on a scientific basis.
Insurance In India
It is said that Insurance was practiced in India even in the vedic times and the Sanskrit term “Yogakshema” in the Rigveda is in reference to a form of Insurance practiced by the Aryans 3000 years ago. The code of Manu which prescribes the many practices to be followed by the people for social harmony and development in Ancient India had also dictated that a special charge be made on goods carried from one city to another to ensure their safe carriage to the destination.By 1885 there were more than 50 British and other foreign agencies having their offices in India. The success of the Managing Agents encouraged the growth of many Insurance offices largely with foreign capital many of which were short lived.
In India Two British Companies - the European and the Albert entered in 1870 and attempted writing business on Indian lives. The first Indian Life assurance Society was formed in the same year called “Bombay Mutual Assurance Society Ltd.”
It was followed by “Oriental Life Assurance Society Ltd.” in 1874, “Bharat” in 1896 and “Empire of India” in 1897.
The New India, Vulcan, Jupiter, British India General and the Universal. These five were composite and dealing both in life and general Insurance.
The Swadeshi Movement of 1905 and Mahatma Gandhis’ call to Indians to give their business only to Indian Companies gave a boost to these new companies and they consolidated their position. More Indian companies entered the Life Insurance sector namely Hindustan Co-operative, United India, Bombay Life, National and Laxmi. But the going was not easy as they had little experience in the field of Insurance and they had to compete with 150 foreign offices including some of the largest Insurance groups in the world.
Insurance in Modern India
Government started exercising control on Insurance business by passing “Insurance Act” in 1912. This Act was comprehensively amended and passed as New Act in 1938 for controlling Investment of funds, expenditure and Management. The Office of Controller was established. Again, this Act was amended in 1950.By 1955, 170 Insurance offices and 80 P.F. Societies registered companies were doing Life Insurance business in India. In view of surge in malpractices in Life Insurance business, due to the illiteracy level being high and lack in will for penetration/ spread of Life Insurance business, it was nationalised by Government of India and LIC Act was passed in June’1956, and this Act came into force from 1.9.1956.
Similarly the general insurance (which deals with non-life business i.e insurance of property) also nationalized in 1972 after merging of 55 Indian and 52 non Indian companies were nationalized by forming four general insurance companies.
The Govt. Of India, while liberalizing the Indian economy, also felt the liberalization of insurance sector because of lower penetration of insurance as compared to Indian population and its size and other developing countries. Initially the Govt. formed a Malhotra committee in 1993 to study whether the insurance sector should be opened for private players. The committee recommended to Liberalized, Privatized And Globalize (LPG) the insurance sector. In 1999, the Authority known as Insurance Regulatory & Development Authority through IRDA Act 1999 was formed.
After 44 years and 27 years of monopoly of life and general insurance respectively was broken.
Liberalisation of Insurance industry will undoubtedly benefit Indian economy, the Govt., Industry, Employee, Consumer & Society in the following manner:
Benefits to Economy
- Rapid investment
- Improve Quality to Life (New risk covers)
- Competition will bring Consumer Friendly Products
- Large Scale Mobilisation of Funds
- Insurance & Reinsurance Facilities to Major Projects
- Export Projects covered at Home
Benefits to Government
- Long Term Funds for Infrastructure
- Long Term Debt Market Instruments Available
- Increased Employment Opportunities & Compensation
- Reduced Financial Burden of Rural, Social & Backward Classes
- Contributions in Calamities (Sharing of Social Responsibilities)
Benefits to Industry
- Transfer of Technical Expertise
- Innovative Products and Pricing Options
- Improved Prospects for National Cos.
- Domestic Industry will Utilize Technology and Service Customer with Loyalty
- Market Driven Economy will Benefit Customer the most
Benefits to Consumer
- Superior Quality at Lower Prices
- Wider Choice of Products
- World Class Service to the Consumer
- Increased Penetration of Insurance
Benefits to Employee
- Human Resource Development
- Exposure to ‘State of the Art Practices”
- Greater Job Opportunities
- Higher Remuneration
- Professional Management Practices
Benefits to Society
- Insurance Companies Act as Guardians in number of Ways:
- Risk cover for Large Industry, Trade & Property are offered in Compliance to Law
- Environmental Risks get Reduced
- Hit – and – Run Compensations
- Crop Insurance for Covering Risk of Nature – Poor Rainfall etc.
- Socio Responsibilities Burden shared Education, Medical, Health, Accident