What is Insurance & Nationalisation of Life Insurance in India
What is Insurance ?
Every asset has value for its owner and also for those who are benefitted with the existence of that asset. Insurance is concerned with the protection of economic value of assets. All of us are interested in the creation of assets because, All assets have values.
Every asset has normally an expected lifetime. During this period, it is expected to perform and provide income/ comfort to the owner. The owner, being aware of this, plans the things in such a way that by the time the expected lifetime of the asset expires, he is ready with the funds required for its replacement. In this way, he ensures that the value or income from the asset is not lost. Well, this appears to be a fine arrangement provided the asset completes its expected lifetime!
All assets carry the risk of being destroyed or damaged. But all assets may not necessarily get destroyed or damaged. Only in few instances, the probability turns out to be true and the asset gets actually lost or destroyed by accident or some other unfortunate event before the completion of its expected lifetime. The owner and those deriving benefits from the asset will suffer because the arrangement to make available its substitute is not yet ready.
This is helpful in mitigating such adverse consequences. To sum up, assets are insured, as they are likely to be lost or made non- functional through an accidental occurence.
Insurance does not protect the assets. This means that cannot prevent loss to the assets due to perils. Non can insurance avoid the occurrence of perils. It only compensates, may not be fully, the economic or financial loss resulting to the asset from such damage or destruction.
History of Insurance
The beginning of this business is traced to the city of london. It started with the marine business. Marine traders, who used to gather at Lloyd’s cofee house in London, agreed to share losses included:-
- Loss of ship sinking due to bad weather in high seas.
- Goods in transit by ship robbed by sea pirates.
- Loss of or damage to the goods in transit by ship due to bad weather in high seas.
The first policy was issued in english in 1583.
Life Insurance in India
In india started with life insurance. It was in the early 19th Century when the Britishers on their posting in India felt the need of life insurance cover.
In started with English Companies like. ‘The European and the Albert’. The first Indian insurance company was the Bombay mutual assurance society Ltd., formed in 1870.
In the wake of the Swadeshi Movement in India in the early 1900s, quite a good number of Indian companies were formed in various parts of the country to transact this business. To name a few:- ‘Hindustan Co- Operative’ and National Insurance’ in Kolkata, ‘United India’ in chennai, ‘Bombay Life’ ‘New India’ and ‘Jupiter’ in Mumbai and ‘ Lakshmi Insurance, in New Delhi.
Nationalisation of life insurance in India
In 1956, life insurance business was nationalised and LIC of India came into being on 01.09.1956. The government took over the business of 245 companies (including 75 percent fund societies) who were transacting life insurance business at that time. Thereafter, LIC got the exclusive privilege to transact life insurance business in India.
Relevant laws were ammended in 1999 and LIC’s monopoly right to transact life insurance business in India came to end. At the close of fianancial year ending 31.03.2004, Twelve new companies were registered with Insurance Regulatory & Development Authority (IRDA) to transact this business in India.