Insurance, as a vibrant Financial Industry, has an enormous potential with abundant scope to source out premium collections as well provide multi facet security to people. India being a country with large rural population has potential untapped for want of more organized activity.
History of Insurance :
Existence of the concept of Insurance can be traced back to the phrase “Yogakshemem Vahamyaham” from the Bhagavad Gita and thereafter in the joint family systems.
Further, Insurance in its present profiles takes us back to the Great fire of London in 1966, trade agreements in Lloyd’s coffee house in London etc. In India, the English Company started operating in 1818.
How has the Insurance sector Grown in India ~
- 1818 First insurance company to start life insurance business in India in 1818 was the Oriental Life Insurance Company in Kolkata. The company failed in 1834.
- 1829 The Madras Equitable started transacting life insurance business in the Madras Presidency.
- 1870 British Insurance Act 1870 was enacted and Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) in the Bombay Residency started its activities.
- 1912 It was breakthrough in Indian Insurance history as a first Statutory measure “Indian Life Assurance Companies Act 1912” was passed to regulate Life Insurance Business.
- 1928 The Indian Insurance Companies Act 1928 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.
- 1938 To provide the Government effective control over the activities of insurers, the earlier legislation was consolidated and amended with a view to protect the interest of the insuring public
- 1950s Move by the Government of India to nationalize insurance business as the level of competition in the insurance business was very high and there were allegations of unfair trade practices.
- 1956 Formation of LIC: on 19 January 1956 an Ordinance was issued nationalising the life insurance sector and the Life Insurance Corporation (LIC) of India came into existence.
- 1999 Formation of IRDA
Insurance Regulatory and Development Authority (IRDA). The IRDA was incorporated as a statutory body in April 2000 to regulate and develop the insurance industry The key objectives of the IRDA include the promotion of competition with a view to increase customer satisfaction through more consumer choice and lower premiums, while ensuring the financial security of the insurance market.
- Under current regulations the foreign partner can hold 26% stake of Foreign Direct Investment (FDI) in the joint venture. Now there is a proposal to increase the FDI from 26% to 49%, which is awaiting approval in Parliament. At present there are 23 Life Insurance companies conducting Life Insurance business in India.
The Insurance sector is poised for significant growth in the coming decade and is widely considered a sunrise sector. The contributions can help our country in various developmental activities.
Channeling premiums into Investment projects:
The premiums collected can be used for funding infrastructure projects and progressive activities will blossom
These activities in turn will open new vistas of Employment opportunities and thus helps to improve living standards of people.
The funds so channeled will ensure optimum safety and bring orderly growth of returns. Then people will have better faith in Insurance and accept insurance as a sound saving system.
Increases the Risk taking abilities of business:
When people are assured of safety against personal risks, they tend to concentrate more on their business which in turn brings growth in business and increase in income.
Increases Tax Revenue for the Government:
Growth in Insurance Industry indirectly promote better education to children, lucrative job opportunities, larger collections of service tax, education cess, Income Tax etc.
Improves overall Growth of Economy:
When an individual grows, business flourishes, higher investment potential happens, brings more revenue to Government, and tension free life to business man and all industries flourish.
The Business of Insurance is a long term investment for companies. The insurance companies in India have begun to break even after almost a decade of gestation and some companies have reported profits as well. The Insurance sector is poised for significant growth in the coming decade and is widely considered a sunrise sector in India, for now.