History of Insurance Policies

           The business of insurance started with marine business. Traders, who used to gather in Lloyd’s Coffee House in London, agreed to share the losses to their goods while being carried by ships. The loss used to occur because of pirates who robbed on the high seas or because of bad weather spoiling the goods or sinking the ship. The first insurance policy was issued in 1583 CE in England.

             In India insurance began in 1870 CE with life insurance being transacted by an English company, ‘The European and The Albert’. The first Indian insurance, company was the Bombay Mutual Assurance Society Ltd., formed in 1870 CE. This was followed by the Oriental Life Assurance Co., in 1874 CE, the Bharat in 1896 CE, and the Empire of India in 1897 CE. Later Hindusthan Cooperative was formed in Calcutta, United India in Madras, Bombay Life in Bombay, National in Calcutta, New India in Bombay, Jupiter in Bombay, and Lakshmi in New Delhi.

These were all Indian companies, started as a result of the Swadeshi Movement in the early 1900s. In the year 1956 life insurance business was nationalized with the primary objective of harnessing the investment of insurance companies for national development and also spread of life insurance to every nook and corner of the country.

Life Insurance Corporation (LIC) of India was set up on 1 January 1956 with the assets and liabilities
of 245 insurance companies existing in 1956. LIC gave a phenomenal growth to the volume of business and acceptability of life insurance rose very high.

The General Insurance Corporation (GIC) of India established under the General Insurance
Corporation of India Act, 1972 classified into four distinct companies which are
(i) National Insurance Company Ltd.
(ii) New India Insurance Company Ltd.
(iii) Oriental Fire and General Insurance Company Ltd., and
(iv) United India Fire and General Insurance Company Ltd.

These companies would work separately maintaining their distinct features but they are controlled and guided by the General Insurance Corporation of India. This is a neo-techno scheme of nationalization where the companies are also to work freely in the market. They will suffer and gain their own losses and profits. The monopoly of the Corporation has gone in this new technique. Now these companies are not the subsidiaries of the GIC.

India, being a member of WTO, was under the obligation to throw open its insurance business to
private players. Therefore Malhotra Committee was appointed in April 1993 to give its recommendation.
This committee recommended opening-up of the insurance industry. Some of the reasons and
recommendations are given here under:
1. Choice available in price, service, and product, inadequate.
2. Spread of business at slow pace.
3. Integration with world’s insurance services/market, lacking.
4. Operational flexibility to be increased.
5. Full use of Information Technology needed.
6. Customer-focused policies needed.
7. Effective regulator to overview the insurance industry.

Accordingly, the government promulgated the Insurance Regulatory and Development Authority
Act (IRDA), 1999, which came into force in April, 2000. IRDA brought out quite a good number
of regulations that paved the way for launch of private insurers. By middle of the year 2000, private
players started appearing on the national scene. As of now, fifteen new companies have entered the life insurance field while only nine are in the non-life business.

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