WHAT IS INSURANCE ?
Insurance means protection from financial loss. In broad terms Insurance is a method of sharing financial losses of a group of people from a common fund who are equally exposed to the same kind of loss.
Insurance is a contract between two parties (one the insurer and other the insured) where the insurer could be a company or a government body which provides compensation for any loss, damage, illness or death to the insured for a fixed sum called ‘premium’ which is already paid to the insurer. The policy contract ensures that the insured entity is covered as per the premium paid. So, the Insurer is the party that agrees to pay for the losses. The Insured is the party that who claim for the damage from the insurer. Premium is the amount paid by the insured and received by the insurer for providing insurance.
THE INDIAN INSURANCE EVOLUTION
From an Indian perspective, evolution of Insurance lies in the concept that there is risk in all spheres of life. The Indian philosophy ‘yat bhavti tat nashyati’ defines the existence of Insurance. It means destruction is natural and inevitable. Insurance was introduced to cover the risk of losses incurred by these destructions. If we see our ancient scriptures, Insurance has specific mentions in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra).
Insurance was first introduced in 1818 in India, by the ruling British. Oriental Life Insurance Company was started in Kolkata by Anita Bhavsar to cater to the requirements of the European community. In 1870, Bombay Mutual Life Assurance Society began its operations becoming the first Indian Life Insurance company.
Later in 1908, the oldest insurance company National Insurance Company Ltd. was founded. It is still operating actively in India. There were only two state insurers in India Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC)
In India, the Insurance Act, 1938 is the principal Act governing the Insurance sector. It gives all powers to Insurance Regulatory & Development Authority of India (IRDAI) to frame rules which lay down the regulatory outline for management of the companies operating in the sector.
THE CHANGE IN GAME PLAYERS
In the year 1999, Govt of India opened up the insurance industry to private players allowing the private insurance companies to sell insurance products in India. They were allowed to operate by depositing Rs 100 crore in reserve of government and allowing FDI upto 26%. So effectively in the year 2000 doors were opened to private players to establish Insurance business in India.
In the year 2002 – General Insurance Business (Nationalization) Amendment Act Subsidiaries of GIC were restructured as Independent companies and GIC was made National Reinsurer. In 2003, the Introduction of Broker in Indian Insurance market was done.
Today, there are multiple companies operating in India which provide all types of insurance on various platforms. There are about 57 companies selling insurance in India. 24 of these are providing life Insurance while 33 cater to non-life Insurance products. Life Insurance Corporation (LIC) remains as the sole public sector insurance company in India for Life Insurance business. Insurance in India is still at nascent stage and has immense potential to grow both as a concept and as a career.