Man has always been in search of security and protection from the beginning of civilization. At the same time “Risk” is inevitable in life and any business activity. Again risk is closely connected with “ownership”. It is the owners who want to save themselves from risk and it is out of this desire, the concept of insurance has originated.
The aim and objective of insurance is to protect the owner from financial losses that he suffers for the risks that he has taken. The basis of insurance is sharing of losses of a few amongst many. Insurance provides financial stability and security to both individuals and organizations by this distribution of losses of a few among many by building up a fund over a period of time.
History of General Insurance
Globally, the history of general insurance can be traced back to the early civilization. As the incidence of losses increased with the advancement of civilization, slowly the idea and concept of loss pooling and loss sharing started taking roots. Historical facts show that the Aryans through their cooperatives practiced the loss of profits insurances. The Mediterranean merchants also practised insurances from as early as the 4th century BC through the issue of bottomry bonds, which is an advance of money in a ship during the period of voyage, repayable on the arrival of the ship. The Code of Manu also indicates the practice of marine insurance by Indian with their counter parts in SriLanka, Egypt and Greece.
Marine insurance is the oldest type of insurance originating in England, as early as in the 12th century. The earliest transaction of insurance as practised today can be traced back to the 14th century AD in Italy.
General insurance as a whole, developed with the industrial revolution in the West and with the consequent growth of seafaring trade and commerce in the seventh century. In India too, evidence of insurance in some form can be traced as early as from the Aryan period. The British and some of the other foreign insurance companies through their agencies transacted insurance business in India. The first general insurance company in India was the Triton Insurance company Ltd., established in Calcutta in 1850 AD, with the British holding major share. The first general insurance company by Indian promoters was the Indian Mercantile Insurance company Ltd. started in Bombay in 1906-07. Following the First World War, several foreign insurance companies started insurance business in India, capturing about 40 percent of the insurance market in India at the time of Independence.
Insurance business in India is governed by the Insurance Act of 1938, which was amended later in 1969. However, in 1971, the government by an ordinance nationalized the general insurance business, under the General insurance Nationalization Act, 1972 to ensure orderly and healthy growth of the business. The then existing 107 companies were brought under the aegis of General Insurance Corporation (GIC) of India. The GIC was thus entrusted with the responsibility of superintending, controlling, and ensuring smooth and healthy conduct of the general insurance business in India along with its four subsidiaries in all the zones in India.