When was the life insurance sector nationalized?
The insurance industry is one of the most important sectors in the Indian Economy, it contributes greatly to the Indian economy by providing stability and growth. The insurance sector contributes to the Indian economy as a financial intermediary and also mitigates the risks effectively.
The nationalization of the Life insurance sector was implemented keeping in mind the smooth conduct of the insurance sector and the welfare of the general people of India.
In this article, we will talk about the following:
- Why was the insurance sector nationalized in India?
- When was the life insurance sector nationalized in India?
- What were the aims and objectives of nationalizing the life insurance sector?
Why was the insurance sector nationalized?
- The Oriental Life Insurance Company was the first-ever insurance company to be formed in India, in 1818.
- It was started by the Europeans in Calcutta with the purpose of safeguarding the interests of the European community. This company only insured European lives. Indian natives were not being insured by such companies.
- However, after the pre-independence era, there was an immediate need to change this biased system of discrimination between foreign and Indian Lives. The foreign companies started insuring Indian natives but they were charged heavy and unjustifiable premiums.
- To combat this injustice, The Bombay Mutual Life Assurance Society (established in 1870) was the first Indian Insurance company formed In India that covered Indian lives at reasonable rates.
- With the coming of the twentieth century, many Indian insurance companies were formed. In the year 1912, the Life Insurance Companies Act and The Provident Fund Act were passed to regulate the insurance sector. This act made it mandatory that the life insurance premium rates and periodic valuations of companies needed to be certified by an actuary.
- To eradicate any disparities in form of discrimination between any Indian or foreign life insurance company, The Government of India issued an ordinance on the 19th of January, 1956 nationalizing the life insurance Sector In India.
- With the nationalization of the life insurance sector, about 156 insurance companies, 16 non-Indian companies, and 75 provident societies were all absorbed together, giving birth to the Life Insurance Corporation of India (LIC).
When was the life insurance sector nationalized In India?
The Government of India passed an ordinance on 19th January, 1956 nationalizing the life insurance sector in India.
What were the objectives of Nationalizing the life insurance sector in India?
- To regulate, control and nationalize the life insurance business in India.
- For multinational growth and development of the economy.
- To create the awareness of life insurance business in India.
- To stretch out the insurance business in rural and social sectors of the economy.
- To avoid any fraud/malpractices.
- To provide security protection and complete transparency to the policyholders.
- To steer clear of biased and unhealthy competition
- For efficient conduct of insurance business in India.