The history of general insurance dates back to the Industrial Revolution in the west and the subsequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its origin in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd was set up. This was the first company to carry out all classes of general insurance business.
1957 saw the creation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council structured a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate the investments and to set minimum solvency margins. The Tariff Advisory Committee was also set up then.
History of General Insurance in India:
In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurance companies were amalgamated and grouped into four companies, namely
The General Insurance Corporation of India was incorporated as a company in the year 1971 and it commence business on January 1sst 1973.
This millennium has seen insurance come a full circle in a journey extending to around 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up significantly. In 1993, the Government set up a committee under the chairmanship of R.N. Malhotra, former Governor of RBI, to suggest recommendations for improvements in the insurance sector. The objective was to balance the reforms initiated in the financial sector. The committee submitted its report in 1994 in which, among other things, it recommended that the private sector be allowed to enter the insurance industry. They stated that foreign companies are permitted to enter by floating Indian companies, preferably a joint venture with Indian partners.
By following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an independent body to regulate and develop the insurance industry. The IRDA was integrated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to improve customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.
In August 2000 the IRDA opened up the market private players with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed different regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.
In December, 2000, the subsidiaries of the General Insurance Corporation of India were reorganized as independent companies and at the same time GIC was changed into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
The insurance sector is a gigantic one 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 capability of the country.
General Insurance in India was nationalized with the General Insurance Business Act of 1972. By this process of nationalization the government of India took charge of 55 insurance companies in India and 52 insurers who were in the General Insurance Business. The main function of the General Insurance Corporation of India was supervising and managing the general insurance business in India.With the creation of the general insurance corporation, all the government shares related to the general insurance was transferred to it. The merger of the general insurance companies led to the formation of the four subsidiaries under the general insurance company of India. They were the National Insurance Company Limited, the New India Assurance Company Limited, The Oriental Insurance Company Limited, United India Insurance Company Limited.
The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.
Subscribe to our Youtube Channel