The Evolution Of Term Insurance In India

Imagine a time when people in India didn’t think much about insurance. Back then, life was full of uncertainties, and families faced tough times without much support. Have you ever wondered how things changed? How did term insurance become such an essential part of our lives?

Picture a small village where a man named Raj was worried about his family’s future. He worked hard every day but often thought, “What will happen to my family if something happens to me?” Raj wasn’t alone in his worries. Many people felt the same, but there weren’t many options for them.

It all began many years ago when the idea of term insurance was only a tiny thought in the thoughts of a few progressive individuals. Since then, term insurance in India has expanded and evolved greatly. Large turning points, difficulties, and a great deal of learning have all occurred.

Do you ever wonder how did we get from having little knowledge of insurance to incorporating it into our financial planning? Which significant modifications impacted its path?

If these questions interest you as well, you are in the right place. The article below outlines the fascinating detours of the development of term insurance in India.

History Of Term Insurance In India: All You Need To Know

Curious to uncover the roots of Term Insurance in India? Let’s dive into the past together-

Advent Of Life Insurance Business In India In 1818

Back in 1818, the Oriental Life Insurance Company started in Calcutta. It marked the start of the history of life insurance in India. But sometimes, a good beginning has to end. In 1834, this innovative business was forced to close. In 1829, the Madras Equitable began providing life insurance in the Madras Presidency.

An important turning point in regulatory history was the British Insurance Act of 1870. This act inspired a flourishing insurance industry, especially in the Bombay Residency. Several significant insurance companies rose to prominence in the late nineteenth century, such as Bombay Mutual (1871), Oriental (1874) & Empire of India (1897).

There was fierce rivalry during this time as Indian enterprises prospered alongside international insurance companies like Royal Insurance, Albert Life Assurance, Liverpool and London Globe Insurance, etc. The robust presence of these foreign entities posed significant challenges to the burgeoning Indian insurance industry, shaping its evolution in the years to come.

The Government Of India Started Publishing Returns In 1914

The government made public Indian insurance businesses' financial returns first in 1914. The transparency and regulation of the insurance business saw a major advancement with this law.

Up until 1928, life insurance operations were governed by the Indian Life Assurance Companies Act of 1912. It was later that The Indian Insurance Companies Act of 1928 then was enacted. It gathered comprehensive statistical information pertaining to the life and non-life insurance operations carried out by Indian and international insurers. This helped get an all-around combination of provident insurance societies.

The Insurance Act, which was passed in 1938, put an end to the fight for extensive control. With the goal of providing strong regulations for the insurance business and the protection of consumer interests in India, this act attempted to revise and combine earlier laws.

1950: The Insurance Amendment Act Of 1950 Abolished Principal Agencies

In 1950, the Insurance Amendment Act brought about a change in India’s insurance sector by abolishing principal agencies. However, even with so many insurance businesses and intense competition, unfair commercial practices remained a concern.

The Indian government made the decision to nationalise the insurance industry in order to solve these issues and enact stronger rules. This measure was taken to safeguard consumer interests and develop a more stable market environment by establishing a more organised and equitable industry.

1956: Life Insurance Corporation Came Into Existence

By issuing an Ordinance, the country's life insurance industry took a big step towards nationalisation on January 19, 1956. The Life Insurance Corporation (LIC) eventually emerged.

The LIC brought together 245 firms, including 16 insurers based outside of India, 154 insurers in India, and 75 provident societies. This significant integration gave LIC a monopoly on the life insurance industry, which it maintained until the late 1990s. When the Indian government ultimately chose to permit private companies to return to the insurance business, a new age of consumer choice and competition started.

In its nearly 200-year existence, the insurance industry saw a significant change when the reopening process started in the early 1990s. Establishing a committee under the leadership of former RBI Governor RN Malhotra was a crucial move taken by the Government in 1993. This committee was charged with bringing reforms to bring the insurance industry into line with more general financial shifts taking place across the nation.

The committee's 1994 report was groundbreaking. It recommended opening the doors to private companies, a move that promised to invigorate the industry with fresh competition and innovative approaches. Also, did you know? The report suggested that foreign companies could enter the Indian market with local partners through joint ventures.

April 2000: The IRDA Was Incorporated As A Statutory Body

1999 witnessed the establishment of the Insurance Regulatory and Development Authority (IRDA). It arose as an independent organisation tasked with regulating and developing the insurance industry. The organisation worked well as per the recommendations made by the Malhotra Committee.

After that, the IRDA became a statutory body and was formally incorporated in April 2000. This was an important occasion! The IRDA offered more options and lower rates. It resulted in better maintenance of the financial stability of the insurance sector, promoted competition, and improved customer happiness.

Coming to the present scenario, let’s see how technology is scaling up on the charts-

Technological Advancements And Digital Transformation

Technology and its amazing new advancements have revolutionised the entire world. And the insurance sector witnessed the same. Online platforms have simplified the process, making it easier for consumers to compare policies, understand their features, and purchase term insurance with just a few clicks.

But that’s not all! This era also introduced innovative riders and add-ons, such as accidental death benefits and critical illness cover. These enhancements have significantly boosted the value of term insurance policies.

Today, you can buy term insurance from the comfort of your home. This convenience has made term insurance especially appealing to younger demographics. Meanwhile, initiatives by the IRDAI and insurance companies have played a key part in raising public awareness about the importance of term insurance, further driving its popularity.

Wrapping Up,

As we have seen, term insurance in India has evolved remarkably into a sophisticated financial product. It promises peace of mind, flexibility, and so much more. Think of it as your financial safety net, evolving with you. Who knows, in the future, we might even see term policies with customisations using technology. For now, it’s exciting to watch how this insurance evolves to meet our needs.