Insurance in India – Then, Now and Next

Insurance in India has travelled a long tenure from Ancient times. Insurance meant Life Insurance Corporation (LIC) and now people have started to realize it more than that. Sometime back, people would always expect to get a return for the premium paid and now people are realizing the benefits of insurance beyond recovering premiums.

History of Insurance in India (Then)

Insurance finds its mention in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmsastra), and Kautilya (Arthsastra). It was described as pooling of resources that could be redistributed in case of calamities.

In India, Anita Bhavsar started first insurance company by the name of Oriental Life Insurance Company in 1818 in Kolkata. The company failed but it paved way for future insurance companies. All the insurance companies were private and there was very little regulation. Life insurance and non-life insurance companies were nationalized in year 1956 and 1972 (1 Jan 1973) respectively.

In 1993, Government appointed a committee under former RBI governer R.N. Malhotra to study and recommend ways to improve insurance sector. The committee submitted its report in 1994 and government appointed Insurance Regulatory and Development Authority to further regulate insurance sector in year 1999.

In Dec 2000, General Insurance Corporation (GIC) was separated from four state non-life insurance companies namely National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company and United India Insurance Company. After this, GIC was converted to independent national re-insurance company.

Present Situation (Now)

At present, foreign companies are allowed to take 26% equity share in Indian insurance companies. IRDA regulates insurance industry under section 114A of the Insurance Act of 1938. Insurance Sector is growing at 15-20% in comparison to GDP growth rate of around 5%. Only 6% of Indians have insurance cover – 4.4% life insurance and 5% health insurance cover. Today there are 27 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 24 life insurance companies operating in the country.

Insurance Then Now Next

Future of Insurance (Next)

  1. Insurance penetration is likely to rise in India. Mediclaim policy has been taken by 2 million population (around 2% of population) in India in comparison to 75% in USA.
  2. Government is likely to table to a legislation to increase FDI in insurance industries from 26% to 49%. Increase in FDI is likely to bring professional practice and capital for expansion.
  3. As the young and working population of India is rising, population will need insurance cover. Financial prosperity along with awareness of the need of insurance policy will push more sale of insurance products.
  4. Professionalism of insurance companies and ways to reduce losses by insurance companies will lead to easy availability of cheaper insurance products.
  5. Introduction of e-policy of insurance will further lead to easy management of multiple policies.
  6. Charm of insurance as an investment product (LIC being a favorite investment product) will reduce with the rise of mutual fund industry will lead to reduction in endowment, ULIP and other insurance products. Term insurance is getting more popular and it will continue to become popular.


Insurance sector is active in India since ancient times (well before British ruled India). Insurance sector was private and unregulated, then it was fully nationalized and now it has been deregulated again while allowing private players. However, among all other changes, growth of insurance sector seems to be very likely.


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