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Insurance Laws and Practices

Notes Life Assurance Society, Hand in Hand Society etc. were formed for issuing life insurance policies.
During the early 19th century, a large number of life insurance companies were formed in India
as well, which eventually became part of today’s Life Insurance Corporation of India.
As far as the evolution of non-life insurance is concerned, it all began with the boycott of British
goods and the British administration. These nationalists’ movements made Indians come together
for the common cause of protection of life and goods. This was the time when the swadeshi
movement began. Thus over the years it forced the Government to have its own autonomous
bodies like LIC and GIC taking care of the life and the general insurance in India.
Insurance today is not restricted just to life alone. But it has become the trend or the need of the
hour to insure each and everything one has. So the different areas wherein insurance business
can be done are – Life insurance, Health insurance, Automobile insurance, Property insurance,
Casualty insurance, Liability insurance, Title insurance, Credit insurance, Terrorism insurance,
Political risk insurance.
In the next unit, you will study about the actuarial services and some recent trends in insurance
sector.

13.1 Privatisation of Insurance Sector

You need to know that insurance has always been a politically sensitive subject in India. After 40
years of government protectionism of this massive sector, the new United Front government is
touching dangerous yet interesting ground with their intentions of opening this sector to private
Indian business houses, as well as international players.
Since then, state-owned insurance companies have grown into monoliths, lumbering and often
inefficient but the only alternative. They have been criticized for their huge bureaucracies, but
still have millions of policy holders as there is no alternative.
Any attempt to even suggest letting private players into this vital sector has met with resistance
and agitation from the powerful insurance employees’ unions. The Narasimha Rao government
(1991-96) which unleashed liberal changes in India’s rigid economic structure could not handle
this political hot potato. Ironically, it is the coalition government in power today which has
declared its intention of opening up insurance to the private sector. Ironical because this
government is at the mercy of support from the left groups which have been the most vociferous
opponents of any such move.
No policy initiatives have yet been announced, but the government has already clarified it will
not privatize the existing insurance companies. But while the decision has been welcomed by
the big companies who were planning to make a foray into this lucrative business, the move has
been criticized by trade unions and even some left supporters of the government.
In some ways, it was inevitable – all segments of the financial sector had been opened to private
players and it was only a matter of time before insurance followed. The bigger private players
claim that opening up insurance will give policy holders better products and service; the
opponents of privatization argue that in a poor country like India insurance needs to have social
objectives and newcomers will not have that commitment.

Many international players are eyeing the vast potential of the Indian market and are already
making plans to come in. But it will take some time before the intent translates into policy-the
unions are not going to give up without a fight and in that they will get the support of some
elements of the coalition government.
On October 23, 2000, the Government of India created history once again through the IRDA, by
returning insurance business to private companies which had been abolished way back in 1956.

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