History of Life Insurance in India

Life insurance business in India begins in 1818 with the establishment of Oriental Life Insurance Company in Calcutta, but failed in 1834. The Madras Equitable had started the life insurance business in 1829 in Madras Presidency. The British Insurance Act came into effect in 1870. The Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started their business in the Bombay Residency. The business was totally dominated by foreign companies like Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance.

 The Government of India started publishing returns of Insurance Companies in India in 1914. 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 insurers.

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   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 nationalise insurance business. An Ordinance was issued on 19^th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation (LIC) came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

 The Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body on the recommendations of the Malhotra Committee report. The IRDA was incorporated as a statutory body in April, 2000 with the key objectives to promote the competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

Insurance now a day is every body’s need. We cannot compromise on it.  In market, complex and simple both insurance plans are available. But to choose the right insurance policy, the strategy should be to have a policy on low premium for long term. So that to have a chance to stay invested for longer time.  Always stay away from expensive and lucarative products.  The ideal formula for insurance is to have at low premium, cover maximum and stay connected for longer period. In the mean time we should not forget that the low premium policies are cheap policies, but it is important to note that what benefits it provide us. To have a good policy always study each plan minutely.

The insurance sector is a vast and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.