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Insurance in India

Insurance in India refers to the market for  insurance in India which covers both the public and

private sector organisations. It is listed in the Constitution of India on the in the Seventh Schedule

meaning it can only be legislated by the central government.

The insurance sector has gone through a number of phases by allowing private companies to solicit

insurance and also allowing foreign direct investment. India allowed private companies in insurance

sector in 2000, setting a limit on !I to 2"#, which was increased to $%# in 20&$.'&( )owever, the

largest life*insurance company in India, +ife Insurance Corporation of India is still owned by the

government and carries a sovereign guarantee for all insurance policies issued by it. '

History 

In India, insurance has a deep*rooted history. Insurance in various forms has been mentioned in the

writings of anu -anusmrithi, /agnavalkya -!harmashastra and autilya-1rthashastra. The

fundamental basis of the historical reference to insurance in these ancient Indian tets is the same

i.e. pooling of resources that could be re*distributed in times of calamities such as fire, floods,

epidemics and famine. The early references to Insurance in these tets have reference to marine

trade loans and carriers3 contracts.

Insurance in its current form has its history dating back until &4&4, when Oriental Life Insurance

Company '5( was started by 1nita 6havsar in olkata to cater to the needs of 7uropean community.

The pre*independence era in India saw discrimination between the lives of foreigners -7nglish and

Indians with higher premiums being charged for the latter. In &480, Bombay Mutual Life Assurance

Society  became the first Indian insurer.

 1t the dawn of the twentieth century, many insurance companies were founded. In the year &%&2,

the +ife Insurance Companies 1ct and the 9rovident und 1ct were passed to regulate the insurance

business. The +ife Insurance Companies 1ct, &%&2 made it necessary that the premium*rate tables

and periodical valuations of companies should be certified by an actuary. )owever, the disparity still

eisted as discrimination between Indian and foreign companies. The oldest existing insurance

company in India is theNational Insurance Company , which was founded in 1906, and is still

in business

The :overnment of India issued an ;rdinance on &% <anuary &%=" nationalising the +ife Insurance

sector and +ife Insurance Corporation came into eistence in the same year. The +ife Insurance

Corporation -+IC absorbed &=$ Indian, &" non*Indian insurers as also 8= provident societies>2$=

Indian and foreign insurers in all. In &%82 with the :eneral Insurance 6usiness -?ationalisation 1ct

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was passed by the Indian 9arliament, and conse@uently, :eneral Insurance business was

nationaliAed with effect from & <anuary &%85. &08 insurers were amalgamated and grouped into four

companies, namely ?ational Insurance Company +td., the ?ew India 1ssurance Company +td., the

;riental Insurance Company +td and the Bnited India Insurance Company +td. The :eneral

Insurance Corporation of India was incorporated as a company in &%8& and it commence businesson & <anuary &%85.

The +IC had monopoly till the late %0s when the Insurance sector was reopened to the private

sector. 6efore that, the industry consisted of only two state insurers +ife Insurers -+ife Insurance

Corporation of India, +IC and :eneral Insurers -:eneral Insurance Corporation of India, :IC. :IC

had four subsidiary companies. Dith effect from !ecember 2000, these subsidiaries have been de*

linked from the parent company and were set up as independent insurance companies ;riental

Insurance Company +imited, ?ew India 1ssurance Company +imited, ?ational Insurance Company

+imited and Bnited India Insurance Company +imited.

Industry structure'edit(

6y 20&2 Indian Insurance is a BSE82 billion industry. )owever, only two million people -0.2# of the

total population of & billion are covered under ediclaim, whereas in developed nations like BS1

about 8=# of the total population are covered under some insurance scheme. Dith more and more

private companies in the sector, this situation is epected to change. 7C:C, 7SIC and 1IC provide

insurance services for niche markets. So, their scope is limited by legislation but enFoy some special

powers.

Insurance Repository 'edit(

;n &"th September 20&5, IG!1 launched 3Insurance Gepository3 services in India. It is a uni@ue

concept and first to be introduced in India. This system enables policy holders to buy and keep

insurance policies in dematerialiAed or electronic form. 9olicy holders can hold all his insurance

policies in an electronic format in a single account called electronic insurance account -eI1.

Insurance Gegulatory and !evelopment 1uthority has issued licenses to five entities to act as

Insurance Gepository

?S!+ !atabase anagement +imited, Central Insurance Gepository +imited - CIG+ , S)CI+

9roFects +imited, arvy Insurance repository +imited, C1S Gepository Services +imited

Legal structure'edit(

See also: Insurance Regulatory and Development Autority 

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The insurance sector went through a full circle of phases from being unregulated to completely

regulated and then currently being partly deregulated. It is governed by a number of acts.

The Insurance 1ct of &%54'$( was the first legislation governing all forms of insurance to provide strict

state control over insurance business.+ife insurance in India was completely nationaliAed on &%<anuary &%=", through the +ife Insurance Corporation 1ct. 1ll 2$= insurance companies operating

then in the country were merged into one entity, the +ife Insurance Corporation of India.

The :eneral Insurance 6usiness 1ct of &%82 was enacted to nationalise the about &00 general

insurance companies then and subse@uently merging them into four companies. 1ll the companies

were amalgamated into ?ational Insurance, ?ew India 1ssurance, ;riental Insurance and Bnited

India Insurance, which were head@uartered in each of the four metropolitan cities.Bntil &%%%, there

were no private insurance companies in India. The government then introduced the Insurance

Gegulatory and !evelopment 1uthority 1ct in &%%%, thereby de*regulating the insurance sector and

allowing private companies. urthermore, foreign investment was also allowed and capped at 2"#

holding in the Indian insurance companies.

In 200", the 1ctuaries 1ct was passed by parliament to give the profession statutory status on par

with Chartered 1ccountants, ?otaries, Cost H Dorks 1ccountants, 1dvocates, 1rchitects and

Company Secretaries.1 minimum capital of BSE40 million-Gs.$00 Crore is re@uired by legislation to

set up an insurance business.

!uthorities'edit(

The primary regulator for insurance in India is the Insurance Gegulatory and !evelopment

 1uthority -IG!1 which was established in &%%% under the government legislation called

the Insurance Regulatory and Development Autority Act! "###.'=('"(

The industry recognises eaminations conducted by I1I -for actuaries, III -for agents, brokers

and third*party administrators and IIIS+1 -for surveyors and loss assessors. T1C is the sole data

repository for the non*life industry. I61I gives voice for brokers while :I Council and +I Council are

platforms for insurers. 1I:I71, 1II71, 1II7, 1I+IC7, 1I+I71, +IC;1, :I71I1, :I7B and ?IDI

cater to the employees of the insurers. In addition, there are a doAen ;mbudsman offices to addressclient grievances.

Insurance education'edit(

 1 number of institutions provide specialist education for the insurance industry, these include

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• ?ational Insurance 1cademy, 9une, specialiAed in teaching, conducting research and

providing consulting services in the insurance sector. ?I1 offers a two year 9:! program in

insurance. ?I1 was founded as inistry of inance initiative with capital support from the then

public insurance companies, both +ife -+IC and ?on*+ife -:IC, ?ational, ;riental, Bnited H ?ew

India.

•  1mity School of Insurance 6anking and 1ctuarial science -1SI61S of 1mity Bniversity,

located in ?oida and established in 2000, offers 61 programs in Insurance, Insurance and

6anking, and .Sc.J6.Sc. actuarial sciences to a 9ost :raduate !iploma in 1ctuarial Sciences.

• 9ondicherry Bniversity is offering mba in insurance management. 9ondicherry university is

the only central university which offers insurance management in India.

• 6irla Institute of anagement Technology is a graduate business school located in :reater

?oida, established in &%44, offers a 9:!*I6 program in insurance business management.

This program was launched in 2000 by the Centre for Insurance and Gisk anagement and is

accredited by the Insurance Gegulatory and !evelopment 1uthority. +ife ;ffice anagement

 1ssociation -+;1, BS1 is 6IT7C)3s educational partner and 6IT7C) is an approved

centre for +;1 eamination. The Chartered Insurance Institute -CII, B has accorded

recognition -by way of credits to the 6IT7C) 9:!*I6 program. Their two year 9:!

program in insurance business has been recogniAed as e@uivalent to the 1ssociate level of

the Insurance Institute of India, umbai.

• ?+B, <odhpur, offers a two year 61 and one year S -for engineering graduates programin insurance.

IG!1 controls all the Insurance business in India. They set up the structure and boundaries for the

insurance companies to act within. Starting from licensing to approving the products, IG!1 directs

the companies in India. They also protect customer interests in the country.

To become an insurance advisor in India insurance act &%54 mandates that the individual has to be

Ka aFor with sound mindK. 1fter the advent of IG!1 as Insurance Gegulator it has framed various

regulations viA training hours, eamination and fees which are amended from time to time. Since

?ovember 20&& IG!1 the Insurance Gegulator in India has introduced a syllabus -IC*55 conceived

and developed by CII, +ondon. The syllabus mainly aims to make an Insurance 1gent a financial

professional. 6ut almost all insurers are facing tough times making the candidates pass the

eamination which has become relatively tough.