History

Brief History Of Insurance

Life Insurance in its modern form came to India from England in the year 1818. Oriental
Life Insurance Company started by Europeans in Calcutta was the first life insurance
company on Indian Soil. All the insurance companies established during that period
were brought up with the purpose of looking after the needs of European community
and Indian natives were not being insured by these companies. However, later with the
efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies
started insuring Indian lives. But Indian lives were being treated as sub-standard lives
and heavy extra premiums were being charged on them. Bombay Mutual Life
Assurance Society heralded the birth of first Indian life insurance company in the year
1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly
patriotic motives, insurance companies came into existence to carry the message of
insurance and social security through insurance to various sectors of society. Bharat
Insurance Company (1896) was also one of such companies inspired by nationalism.
The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The
United India in Madras, National Indian and National Insurance in Calcutta and the Co-
operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-
operative Insurance Company took its birth in one of the rooms of the Jorasanko, house
of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General
Assurance and Swadeshi Life (later Bombay Life) were some of the companies
established during the same period. Prior to 1912 India had no legislation to regulate
insurance business. In the year 1912, the Life Insurance Companies Act, and the
Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it
necessary that the premium rate tables and periodical valuations of companies should
be certified by an actuary. But the Act discriminated between foreign and Indian
companies on many accounts, putting the Indian companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business.
From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176
companies with total business-in-force as Rs.298 crore in 1938. During the
mushrooming of insurance companies many financially unsound concerns were also
floated which failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide strict state
control over insurance business. The demand for nationalization of life insurance
industry was made repeatedly in the past but it gathered momentum in 1944 when a bill
to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January, 1956, that life insurance in India was
nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75
provident were operating in India at the time of nationalization. Nationalization was
accomplished in two stages; initially the management of the companies was taken over
by means of an Ordinance, and later, the ownership too by means of a comprehensive
bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of
June 1956, and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and in particular
to the rural areas with a view to reach all insurable persons in the country, providing
them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its
corporate office in the year 1956. Since life insurance contracts are long term contracts
and during the currency of the policy it requires a variety of services need was felt in the
later years to expand the operations and place a branch office at each district
headquarter. Re-organization of LIC took place and large numbers of new branch
offices were opened. As a result of re-organisation servicing functions were transferred
to the branches, and branches were made accounting units. It worked wonders with the
performance of the corporation. It may be seen that from about 200.00 crores of New
Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and
it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with
re-organisation happening in the early eighties, by 1985-86 LIC had already crossed
7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 113 divisional offices,
8 zonal offices, 1381 satallite offices and the Corporate office. LIC’s Wide Area Network
covers 113divisional offices and connects all the branches through a Metro Area
Network. LIC has tied up with some Banks and Service providers to offer on-line
premium collection facility in selected cities. LIC’s ECS and ATM premium payment
facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info
Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai,
Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing
easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices.
The satellite offices are smaller, leaner and closer to the customer. The digitalized
records of the satellite offices will facilitate anywhere servicing and many other
conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized scenario of Indian
insurance and is moving fast on a new growth trajectory surpassing its own past
records. LIC has issued over one crore policies during the current year. It has crossed
the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented
performance records in various aspects of life insurance business. The same motives
which inspired our forefathers to bring insurance into existence in this country inspire us
at LIC to take this message of protection to light the lamps of security in as many homes
as possible and to help the people in providing security to their families.

» Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company
started its business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the
central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,
1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.

» Some of the important milestones in the general insurance business in India

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company.