25 years of the insurance industry: Hits and misses

De-tariffing and portability are two milestones ahead of the Insurance Act amendment that made health insurance independent line of business and raised FDI limits to 49%. The first of a two-part column

- TAMAL BANDYOPADHYAY

Breaking years of stagnation, the Indian insurance industry recently welcomed six new entrants. In the general and health insurance sectors, the latest addition comes after a five-year gap. In the life insurance industry, the gap is longer 12 years.

The Insurance Regulatory and Development Authority of India (Irdai) has turned 25 this year. How does the industry plan to celebrate the silver jubilee? Let's start by rewinding to the pre-Irdai era.

An ordinance was issued on January 19, 1956 nationalising the life insurance sector. That year, the Life Insurance Corporation of India (LIC) came into being, absorbing 154 Indian and 16 foreign insurers, along with 75 provident societies. Provident societies are associations of people who pay regular dues or other sums in return for old-age pensions, sickness benefits, etc. where members contribute regularly in exchange for benefits like old-age pensions and sickness coverage.

Fast-forward to 1972: The General Insurance Business (Nationalisation) Act was passed, paving the way for the nationalisation of the general insurance sector in January 1973. At that time, 107 insurers were amalgamated into four companies: National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd, and United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971; it began operations in January 1973.

The process of reversal started in the early 1990s after India embraced economic liberalisation.

In 1993, the government set up a committee under the chairmanship of then Reserve Bank of India (RBI) governor, RN Malhotra, for reforms in the insurance sector.

In 1994, the committee recommended allowing the private sector into the insurance industry.