Life insurance – History and Evolution:
1. History of insurance:
Insurance has been known to exist in some form or other since
3000 BC.
2. Insurance through the ages:
Babylonian Traders--The Babylonian traders had agreements
where they would pay additional sums to lenders, as a price for
writing off of their loans, in case a shipment was lost or stolen.
These were called, “bottomry loans‟. Under these agreements,
the loan taken against the security of the ship or its goods had to
be repaid only if and when the ship arrived safely, after the
voyage, at its destination.
Traders from Bharuch and Surat-- Practices similar to
Babylonian traders were prevalent among traders from
Bharuch and Surat, sailing in Indian ships to Sri Lanka, Egypt
and Greece.
Greeks-- The Greeks had started benevolent societies in the late
7th century AD, to take care of the funeral – and families – of
members who died. The Friendly Societies of England were
similarly constituted.
Inhabitants of Rhodes--- The inhabitants of Rhodes adopted a
practice whereby, if some goods were lost due to jettisoning1
during distress, the owners of goods (even those who lost nothing)
would bear the losses in some proportion.
Chinese Traders-- Chinese traders in ancient days would keep
their goods in different boats or ships sailing over the treacherous
rivers. They assumed that even if any of the boats suffered such a
fate, the loss of goods would be only partial and not total. The
loss could be distributed and thereby reduced.
3. Modern concepts of insurance:
I. Lloyds: The origins of modern commercial insurance business as
practiced today can be traced to Lloyd’s Coffee House in London.
Traders, who used to gather there, would agree to share the losses,
to their goods being carried by ships, due to perils of the sea. Such
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losses used to occur because of maritime perils, such as pirates
robbing on the high seas, or bad sea weather spoiling the goods
or sinking of the ship due to perils of the sea.
II. Amicable Society for a Perpetual Assurance: founded in 1706
in London is considered to be the first life insurance company in
the world.
III. National Insurance Company Ltd.: The Oldest insurance
company in India. It was founded in 1906 and it is still in
Business.
4. History of insurance in India:
Life insurance in its modern form came to India from England in
1818.
Oriental Life Insurance Company started by Europeans {English}
in Calcutta was the first life insurance company on Indian soil in
1818 Started by Anita Bhavsar to cater to the needs of European
community.
With the effort of eminent people like Babu Muttylal Seal, the
foreign life insurance companies started insuring Indian lives.
Bombay Mutual Life Assurance Society heralded the birth of first
Indian Life Insurance Company in 1870.
Bharat Insurance Company---- 1896
United India—in Madras---------1906
National Indian—iin Calcutta---1906
National Insurance – in Calcutta—1906
Cooperative Insurance—in Lahore--1906
Hindustan Cooperative Insurance Company—1907 in Calcutta
[At Jorasanko, House of Rabindra Nath Tagore].
The Indian Marcantile--- 1907
General Assurance --- 1907
Swadeshi Life[ Bombay life]--- 1907
Important:
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In 1912, the Life Insurance Companies Act and the Provident
Fund Act were passed to regulate the insurance business.
The Insurance Act, 1938 was the first legislation governing not
only life insurance but also non- life insurance to provide strict
control over insurance business.
Nationalisation of life insurance:
On 19th January 1956, that life insurance India was nationalised.
About 154 Indian companies and 75 provident were operating in
India at the time of nationalisation.
The Parliament of India passed the Life Insurance Corporation
Act on 19th June 1956
Life Insurance Corporation of India was created on 1st September
1956.
LIC Has 5 Zonal Offices, 33 Divisional offices, and 212 branch
offices apart from its corporate office [Mumbai] in year 1956.
Today LIC functions with 2048 fully computerized branch
offices, 113 divisional offices, 8 zonal offices, 1381 satellite
offices and the Corporate Office [Located in Mumbai].
LIC’s Wide Area Network [called EFEAP] covers 113 divisional
offices and connects all the branches through a Metro Area
Network.
Satellite Sampark offices are smaller, leaner and closer to the
customer.
LIC has crossed the milestone of issuing 1,01,32,955 new policies
by 15th Oct 2005.
Some of Important milestones in the life insurance business in India:
1. 1818 - Oriental Life Insurance Company, the first life insurance
company on Indian Soil started functioning.
2. 1870 – Bombay Mutual Life Assurance Society, the first Indian
life insurance company started his business.
3. 1912 - The Indian Life Assurance Companies Act enacted as the
first statute to regulate the life insurance business.
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4. 1928- The Indian Insurance Companies Act enacted to enable the
govt. to collect satisfied information about both life and non-life
insurance business.
5. 1938—Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the
insuring public.
6. 1956—245 Indian and foreign insurers and provident fund
societies are taken over by the central govt. and nationalised.
7. LIC formed by an Act of parliament viz, LIC Act, 1956 with a
capital contribution of RS 5 Crore from the govt. of India.
GENERAL INSURANCE:
The General Insurance business in India on the other hand, can traces
its roots to the Triton Insurance company Ltd, the first general
insurance company established in year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance
business in India are:-
1. 1907—The Indian Mercantile Insurance Ltd, setup the first
company to transact all class of general insurance business.
2. 1957—general insurance council, owing of the Insurance
Association of India, Frames a code of conduct for ensuring fair
conduct and sound business practices.
3. 1968—The Insurance Act amended to regulate investments and
set minimum solvency margins and the Tariff Advisory
Committee setup.
4. 1972—The General Insurance Business [Nationalisation] Act,
1972, nationalised the general insurance business in India with
effect from 1st January 1973. [GIBNA ACT, 1972].
5. 107 insurers amalgamated and grouped into four companies Viz.
the National Insurance Company Ltd, the New India Assurance
Company Ltd, And the United India Insurance Company Ltd.
6. GIC incorporated as a company.
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Many other Indian Companies were setup subsequently as a result of
the Swadeshi Movement at the turn of the century.
Malhotra Committee and IRDAI:
In 1993, the Malhotra Committee was setup to explore and
recommend changes for development of the industry including
the reintroduction of an element of competition.
The Committee submitted its report in 1994.
In 1997 the Insurance Regulatory Authority (IRA) was
established.
The passing of the Insurance Regulatory& Development Act,
1999(IRDAI) led to the formation of Insurance Regulatory and
Development Authority of India (IRDAI) in April 2000 as a
statutory regulatory body both for life, non-life and health
insurance industry.
IRDA has been subsequently renamed as IRDAI in 2014.
Its Headquarters- Hyderabad, Telangana
Chairman—Subhash Chandra Khuntia