insurance history

8/7/2019 Insurance history

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INTRODUCTION:

Insurance is a sharing device in which the losses of the few unfortunates is shared by the large

no. of persons exposed to the similar risks.Insurance is a provision for the distribution of risks, i.e it is a financial provision against loss from

unavoidable disasters.

Insurance is a contractual arrangement whereby one party agrees to compensate another party for losses

or in other words it is a mechanism that reduces the consequences due to losses in respect of the assets.

PURPOSE & NEED OF INSURANCE:Purpose of Insurance is to indemnify the loss occurred to Assets due to natural calamities from unexpected

events on account of the following circumstances:-

Every Asset is likely to be destroyed.

Loss caused to Assets due to any peril is the risk that Asset is exposed.

Insurance does not protect the Assets but compensates the economic or financial loss.

Insurance is relevant only if there is uncertainty of occurrence of events leading to loss.Insurance covers tangible Assets and the concept can be extended to intangibles.


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CONTRIBUTION TO INDIAN ECONOMY:

Life Insurance is the only sector which garners long term savings.

Spread of financial services in rural areas and amongst socially less privileged. Long term funds for infrastructure.

Strong positive correlation between development of capital markets and insurance/

pension sector.

Employment generation.

ORGIN OF INSURANCE:Insurance appears simultaneously with the appearance of human society which includes food, clothing,

housing, education, medical care & security in the event of unemployment sickness etc.

Insurance in a modern money economy, in which insurance is part of the financial sphere.

Early methods of transferring or distributing risk were practiced by Chinese & Babylonian traders as

long ago as the 3rd & 2nd millennia BC.

Greeks & Romans introduced the origin of health & life insurance in 600 AD when they organizedguilds called benevolent societies.


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Towards the end of 17th century, London's growing importance as a center for trade increased demand

for marine insurance.Insurance as on today can be traced to the Great fire of London, In 1680, Nicholas Barbon established

Englands first fire insurance company.

In 1752, Benjamin Franklin founded the Philadelphia Contribution ship for the Insurance of Houses

from Loss by Fire.

ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT:Investments are necessary for economic developments.

Life insurance plays a major role in mobilization of public savings.

Savings out of life insurance funds are utilized in investments for growth of the country.

Looking to non-life side business, industry, trade would be seriously handicapped. In the absence of

insurance cover relating to fire & engineering risk.


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INSURANCE IN INDIA:Life Insurance in its modern form came to India from England in the year 1818.

Insurance Business is divided in two parts viz.

General Insurance & Life Insurance.

Life Insurance is better than other insurance of saving in respect of Marketability, Liquidity &Transferability.

A) INSURANCE ACT 1938:

The Act aimed to consolidate and amend the law relating to the business of insurance.

It came into force with effect from 1st July 1939.

Other Important Provisions of Insurance Act,1938:

Regulation of insurance companies.

Maintenance and scrutiny of accounts and valuation reports.

Investment and utilization of funds.

Permissible limits of expenditure.

Approval of premium rated and plans.

Verifying solvency margins.


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B) LIFE INSURANCE CORPORATION OF INDIA ACT, 1956:

Life Insurance business was nationalized in India with effects from 19th January 1956.

Life Insurance business of 154 Indian life offices, the Indian business 16 non-Indian insurers operating in

India and 75 provident Societies were taken over by the govt. of India.

LIC of India Act was passed by the parliament on 18.06.56 but it came into effect from 01.07.56.

C) INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA) ACT, 1999:

To permit private companies to enter the insurance market, Government has enacted Insurance Regulatory

& Development Authority Act, 1999.This Act was passed by the Parliament in December, 1999 but received Presidential assent in January

2000 & the act provides for the establishment of the Authority.

D) INSURANCE ADVISORY COMMITTEE:

This committee can be constituted by notification by the Authority, with the name Insurance Advisory

Committee & it consists of not more than 25 members, excluding ex-officio members.


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E) CONSUMERPROTECTION ACT, 1986:

The Act applies to all the goods and services.It covers private, public and cooperative sectors.

The main feature of the Act is to provide simple, speedy and in expensive redressal to the consumers

grievances.

LIFE INSURANCE:

Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act ofParliament, viz.,Life Insurance Corporation Act, 1956, with capital contribution from the Government of India.

Life Assurance is a contract between the policy owner and the insurer.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured

events.

Life based contracts tend to fall into two major categories:

Protection & Investment Policies.


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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 ofParliament, viz. LIC Act, 1956, with a capital contribution of

Rs. 5crore 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.


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Some of the important milestones in the general insurance business in India are: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.

Life Insurers ie Life Insurance Corporation of India (LIC) and General Insurers ie GeneralInsurance Corporation of India (GIC) GIC had four subsidiary companies.

With effect from Dec'2000, these subsidiaries have been de-linked from parent company and made as an

independent insurance companies. Oriental Insurance Company Limited, New India Assurance Company

Limited, National Insurance Company Limited and United India Insurance Company Limited.

The first batch of licenses were issued by the Insurance Regulatory and Development Authority (IRDA)

in 2001. As on June 2008 following are the players in the Indian Market.

The total no. of life insurers registered with the Authority had gone up to 22, while the total no. ofgeneral insurers registered with IRDA is 21.

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