History Of General Insurance And Its Evolution In India

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Introduction

The concept of pooling funds to support people and property in calamities is deep-rooted in Indian history. It finds mention in the writings of stalwarts like Kautilya. Little doubt exists that this was the precursor to modern-day insurance. However, the history of insurance in India was re-invented during the British era.

Now, let us zoom in on the 21st century. How big is the general insurance market in modern-day India? According to Statista, the value of premiums collected by the Indian insurance industry stands at over INR 5 trillion today. As an investor, you will cross paths with insurance repeatedly. The reason is simple: when you own assets, you must also protect them.

Insurance policies protect you and your property against every imaginable risk. No wonder, insurance comes in various forms. These include life insurance, car insurance, travel insurance, home insurance, etc. So, what is general insurance and what is its history in India? Let’s find out!

What is General Insurance?

A life insurance policy secures an insured’s family in the case of their sudden death. But what about valuables like cars, homes, and jewellery? What if they get stolen or robbed? How does insurance work in that case? This is where general insurance plays a role. General insurance is a blanket term for insurance policies that protect our tangible assets. It is a contract between a policyholder and an insurance provider. Under this contract, the insurance company secures your valuable assets from burglary, theft, or fire. In return, you pay the insurance company periodically for using the policy. These periodic payments are called premiums.

In other words, any insurance outside the purview of life insurance is categorised as general insurance.

History of Insurance in India

Let us first understand the origin of insurance in the global context. The earliest reference to insurance goes back to the code of Hammurabi. Hammurabi was the king of Babylon in the 17th century BC. His code was a set of rules etched on stone pillars that established standards for commercial interactions. Per this code, traders paid a sum to Hammurabi to ensure that their goods arrived safe.

Insurance has evolved greatly over the years. The concept of modern insurance emerged in 1666 during the Great Fire of London. As many as 30,000 homes were destroyed and many lives were affected. The unfortunate incident deeply moved a man named Nicholas Barbon. It prompted him to start a building insurance company. This became the city’s first fire insurance company.

From the west, let us move to the east and understand the origin of insurance in India. Ancient Indian texts spoke about collecting resources to be redistributed among people during difficult times. However, insurance, as a business, made its way to the Indian markets in 1818. Calcutta’s Oriental life Insurance Company became the first to introduce life insurance as a business product.

The company shut in 1834, but the concept attracted curiosity. For the rest of the century, many other organisations stepped into the arena. These included the likes of Madras Equitable and Bombay Mutual. The year 1870 saw the enactment of the British Insurance Act. And in 1914, the Indian Government started publishing returns for the Indian insurance companies. Several legal reforms over the years helped re-shaped the face of the insurance industry.

The Evolution of General Insurance in India

Till now, we have shed light on the evolution of insurance in India. But how did general insurance evolve in this country? Let us discover more about this aspect of the origin of insurance.

The concept travelled to India through the British colonial rulers. The British established the Triton Insurance Company Ltd. in India in 1850, thus introducing the idea of general insurance. In 1907, Indian Mercantile Insurance Ltd. became the first company to deal with general insurance policies. The next landmark came almost 50 years later in 1957. The Insurance Association of India set up a special council for general insurance-related matters. Its job was to ensure fair trade practices with the help of a code of conduct.

Several other developments took place over the next few years. For instance, acts were enacted to regulate investments. Several councils and committees were set up. To manage the rising popularity of general insurance, the Government nationalised the sector in 1972. A total of 107 Insurers were brought together under the following four companies:

The Oriental Insurance Company Ltd.
National Insurance Company Ltd.
The United India Insurance Company Ltd.
The New India Assurance Company Ltd.

Finally, the General Insurance Corporation of India was established on January 1, 1973. However, for three decades the insurance sector was Government-backed. Private players were not allowed to provide general insurance policies. From the 1990s, the insurance sector witnessed a sea of reforms. First, the Insurance Regulatory and Development Authority (IRDA) was constituted. As the name suggests, the IRDA regulates different insurance companies. Second, private players entered the general insurance market. The insurance sector, in its current form, primarily took shape in the early 2000s. Today, India has 34 general insurance companies. Business is robust. And the insurance sector contributes to 7% of our Gross Domestic Product (GDP).

Conclusion

Insurance in India has come a long way since its origin nearly 400 years ago. Insurance policies today offer attractive rewards. Instead of just insuring a subscriber, they provide various add-ons. From two-wheelers to our travels, every aspect of our lives can be insured. Now that we have come so far, is there still room for improvement? What more can be used to enhance a policyholder’s experience? These are some of the interesting questions that only time can answer.