Insurance is an agreement in which a person makes regular payments to a company and the company promises to pay money if the person is injured or dies, or to pay money equal to the value of something (such as a house or car) if it is damaged, lost or stolen or a risk-transfer mechanism that ensures full or partial financial compensation for the loss or damage caused by event(s) beyond the control of the insured party.
Under an insurance contract, a party (the insurer) indemnifies the other party (the insured) against a specified amount of loss, occurring from specified eventualities within a specified period, provided a fee called premium is paid. In general insurance, compensation is normally proportionate to the loss incurred, whereas in life insurance usually a fixed sum is paid. Some types of insurance (such as product liability insurance) are an essential component of risk management, and are mandatory in several countries. Insurance, however, provides protection only against tangible losses. It cannot ensure continuity of business, market share, or customer confidence and cannot provide knowledge, skills or resources to resume the operations after a disaster.
Important milestones in the Indian Life Insurance Business
- 1912 : The Indian Life Assurance Companies Act came into force for regulating the life insurance business.
- 1928 : The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance.
- 1938 : The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.
- 1956 : 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.
The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.
Important milestones in the Indian General Insurance Business
- 1907 : The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all general insurance business.
- 1957 : General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns.
- 1968 : The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff Advisory Committee was set up.
- 1972 : The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India. It was with effect from 1st January 1973.
107 insurers integrated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC was incorporated as a company.
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