Interested in knowing the history of insurance in India? Take a journey back in time and learn about the evolution of insurance through the ages.
You might not believe it but right from ancient times, insurance has been a part of our Indian culture. Just like banking, investment and trade, insurance too boasts of a deep-rooted history going back to the ancient eras. To elaborate, if a storm destroyed someone’s house or a person suffered injuries due to a natural calamity, neighbours and community members were obliged to help. This help would come in the form of food, shelter, resources, etc. Over time, this process got streamlined into what we today call insurance.
History of Insurance in India
Insurance has been written about in the ancient texts of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra), where emphases were laid upon pooling of resources. When disaster struck, this pool of resources would get redistributed to help those affected within the community or village the distressed was part of. Over time, Indians borrowed heavily from other nations to create the modern avatar of insurance.
A Brief Timeline of Insurance in India
In 1818, the first insurance company in India was established in Calcutta (modern day Kolkata), The Oriental Life Insurance Company. Similarly, Bombay (Mumbai) had the Bombay Life Assurance Company and Madras (Chennai) had the Madras Equitable Assurance Company, which were started in 1823 and 1829 respectively. In the initial days, Indians had to pay an extremely high premium than compared to the British residents. It was the Bombay Life Assurance Company, which became the first insurance company established by an Indian that started insuring Indians without charging extra premiums.
During the initial year of this century, the industry was highly unregulated. It was only in 1912 that the Indian Life Insurance Companies Act, 1912 was passed. This Act structured insurance and made it mandatory for premiums and company valuations to be certified by an actuary.
By 1938, there were around 176 insurance companies in India with the total business valuing around Rs. 300 crores. It was around the same time that the Insurance Act of 1938 was passed. This was the first piece of legislation covering both life insurance and general insurance.
While the demand for nationalisation of insurance companies had been going on for a while, it was only with the passing of the Life Insurance Corporation Act of 1956 that nationalisation of insurance as finally achieved. On September 1, 1956, the Life Insurance Corporation of India (LIC of India) was established with the intent of covering all Indians across the length and breadth of the nation.
In 1972, the General Insurance Business (Nationalisation) Act was passed which nationalised all general insurance companies in India. The 107 odd companies existing around the time were all merged into four companies:
- New India Assurance Company Ltd.
- National Insurance Company Ltd.
- Oriental Insurance Company Ltd.
- United India Insurance Company Ltd.
As per the recommendations made by the Malhotra Committee, two things happened in the year 1999: one, the private sector was permitted to enter the insurance business and, two, the Insurance Regulatory and Development Authority of India (IRDAI) was constituted. IRDAI was incorporated in April 2000 and is now an autonomous body that works towards growing the insurance industry.
Till date, IRDAI frames regulations under Section 114A of the Insurance Act, 1938.