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Insurance Sector in India: A Backdrop

Senthuran

Insurance sector in India has been enjoying a state-monopoly status in India for decades. Under Indian conditions there is only two broad classification of insurance companies: life and non-life insurance. The life insurance activities are solely managed by Life Insurance Corporation of India and the rest is handled by General Insurance Corporation of India.

Life insurance business was started in India during British rule. Prior to independence, there were several insurance companies : Oriental Life Insurance Company, Bombay Life Assurance, The Madras Equitable Life Insurance Society, Oriental Government Security Life Assurance Company, etc. Most of the insurance companies were charging a very high extra premium of 15 to 20 per cent, since they considered Indian lives as sub-standard.

These insurance companies prevailed during the time of independence failed to sustain on a long term basis. As many as 25 companies were liquidated and another 25 companies had to merge with other companies at a lost to the policyholders. This has forced the Government of India in 1956 to nationalise all the 245 life insurance companies (154 Indian and 16 foreign), and form the Life Insurance Corporation of India.

Financial Performance of Life Insurance Corporation of India, 1997
(figures in Rs crore)

Total premium	16240
Investment income	9396
Total income	25921
Management expenses	3504
Total outgo	10843
Total assets	91448
Life fund	87760

Till December 1972, the Indian general insurance market was overcrowded with as many as 107 companies. However, as in the case of commercial banks, all these insurance companies were nationalised under an act in 1972, which has yielded the state-monopoly General Insurance Corporation of India. General Insurance Corporation of India operates through four of its subsidiary companies which are spread geographically. They are : National Insurance Company (Calcutta-based), New India Assurance Company (Mumbai-based), Oriental Insurance Company (New Delhi-based) and United India Insurance Company (Chennai-based). The paid up capital of General Insurance Company is fully subscribed by the Indian Government.

Financial Performance of General Insurance Corporation of India, 1996-97(figures in Rs crore)

Total gross direct premium	7347.86
Total investment income	1755.07
Profit before tax	1084.08
Paid up capital and free reserves	4812.58
Total assets (March 1997)	18705.89
Total of technical reserves	11400.25
Dividend to Government (on an original investment of Rs 21.50 crore)	64.50

However, the Government is planning to open this sector for private and overseas players. Towards this end, the Government is planning for a formation of an Insurance Regulatory Authority.