How Life Insurance Has Progressed In India

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The life insurance sector has certainly come a long way in India. The first ever life insurance company that was established in the country was the Oriental Life Insurance Company which came into existence in 1818. Oriental was a British company and basically provided insurance policies to the Europeans residing in India. Nearly a decade later i.e. in the year 1956, around 250 existing life insurance companies were combined to form one single company. The Life Insurance Corporation of India, popularly known as LIC, then become the sole insurance provider in the country.

Though the first life insurance company was set up in the 19th century, the concept of insurance existed in the country long before that. Insurance even finds mention in many ancient texts such as the Manusmriti and the Arthasastra. Back then, however, there were no companies but people pooled in resources and stored them for emergencies such as a natural calamity.

Given below is the timeline of the development of the insurance industry as a whole in India:

• 1912 – The Indian Life Assurance Companies Act was passed. It was the very first regulation for the insurance sector.
• 1914 – The government published the returns of the insurance companies.
• 1928 – The government was permitted to collect information with regard to the transactions made by Indian and foreign insurance companies in India.
• 1938 – The previous legislation was modified to enable health management of the insurance companies.
• 1950 – Principal agencies were removed with The Insurance Amendment Act. Due to the malpractices that were found in the industry, the government decided to nationalise the insurance sector.
• 1956 - LIC absorbed 16 foreign insurance companies, 154 Indian insurance companies and 75 provident societies to become the only life insurer in the country.
• 1957 – The General Insurance Council was formed to make sure sound and fair practices were carried out in the insurance business.
• 1968 – The Insurance Act was further amended to control investments and fix the minimum solvency cap.
• 1993 – The Malhotra committee was set up to come up with any factors that would help better the industry.
• 1994 – The Malhotra Committee suggested that private insurance companies be permitted to be established. Foreign companies would enter the market, preferably as a partnership with an Indian company.
• 1999 – The Insurance Regulatory and Development Authority of India (IRDAI) was created as an autonomous body that would help manage and develop the industry.
• 2000 – The IRDAI was made a statutory body that would encourage healthy competition to increase consumer satisfaction by way of designing more products at a lesser cost. The Foreign Direct Investment (FDI) was set at 26%.
• 2015 – The FDI limit was increased to 49%.
• 2016 – The total premium income for 2016-17 was recorded as approximately Rs.4.18 lakh crore in the life insurance sector.

Both public and private companies in the insurance sector are doing well. While the private sector grew by about 17.4% from 2015-16 to 2016-17, LIC grew by 12.78% in terms of the premium earned. A whole lot of life insurance plans are available in the market such as term insurance plans, whole life insurance plans, endowment plans, Unit-linked insurance plans (ULIPs), money-back plans, retirement plans, and children’s plans. Each of the plan types has a different objective and offers the protection option, or the savings option or both.

A milestone development seen in the last few years is the introduction of the online mode in the life insurance business. Since most people prefer doing research and carrying out transactions online, insurance companies slowly developed the online platform to help make the insurance buying and managing process simple and easy.

Insurance companies offer a whole range of services through the online medium. Individuals who are interested in buying a policy can look up details about the insurance policy through the official website and retrieve quotes too. Once he/she zeroes in on one particular policy, he/she can buy the plan online, pay premiums online, register claims online, track claims online, etc.

The insurance sector in India is growing at a steady rate from about 15% to 20%. It contributes to the country’s GDP along with the banking sector. A stable insurance sector will automatically translate to the production of funds for better infrastructure and higher strength in handling risks in the country.