Mobilisation of Funds in Insurance Industry

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It has been established that village co-operatives insured against loss of profit in an industry in the early days of the Aryan Civilization. There were contacts safeguarding risks of transport by sea or land. Further these well renowned joint-family system rendered services similar to those of present life assurances. However expecting the system of joint family all other gradually waned and insurance in the modern sense appeared in the late eighteenth and early nineteenth centuries by the established of seven Marine Insurance companies in Calcutta-then the centre of trade and commerce in India. This was followed in due course by the opening of branches and or agencies in India by many British offices, and some continental and colonial insurers. Even the American offices did not lag behind.

The successful operation of the foreign insurers encouraged the formation of life offices in India in the late nineteenth century such as Bombay Mutual in 1871 and the oriental in 1874 and Hindustan cooperative in 1907 other life offices followed. The swadeshi movement at the beginning of the present century was responsible for the establishment of various insurers with Indian capital. Thus in 1907 the Indian Mercantile was the first Indian general insurance company followed later on by New India in 1919 and six other insurers. The year 1922 and 1923 were very critical for these young general insurers in as much as they had to compete with 150 foreign offices that had not only the experience of actual organization but also a tradition of general insurance business behind them. On the top of this the exchange banks provided impediments in one-way or the other. However patriotism of the Indian public saw the general insurers through this difficult period and national agitation insisting for legislative protection compelled the government of India to investigate into the matter.

As a result of the above-mentioned investigation the Insurance Act of 1938 came into existence, which removed the hideous distinction between Indians and Non-Indian companies as far as provisions relating to deposits and submission of returns were concerned. The Nationalism or swadeshi spirit brought about an increase in the share of Indian insurers of the business in India from 11 percent in 1928 to 31 percent in 1939 largely at the expense of foreign offices.


The Second World War helped the establishment of several indigenous industries the managing agents of which tried to acquire the control of insurance companies and banks to provide easy finance for their undertakings. This lead to the appointment of Cowasji Jehangir Enquiry Committee resulting in certain amendments of the Insurance Act, 1938. The Indian insures successfully faced the Bombay Explosion of 1944 and survived the partition of the country in 1947.

1951 onwards this has been a period of increasing business for Indian insurers due to the following causes:

1. The growing confidence of the Indian public.

2. The increasing awareness of the Indian public of the benefits of insurance.

3. The five-year plans.

4. The development plans undertaken by some of the leading insurers.

The increase in life business of Indian insurers in the years 1954 and 1955 was phenomenal and on 19th January 1956 the government of India nationalized the life insurance business in India as a result of which the Life Insurance Corporation of India formally came into existence on September 1956. The main aims of nationalisation were:

1. Provision of complete security to the policyholders.

2. To prevent malpractices prevalent in life business.

3. To spread insurance to rural areas.

4. To encourage public savings and channel the same to finance national plans.

Consequently not only is the LIC at present the main source of...
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