The evolution of the insurance industry in India can be traced back to the early 1800s when foreign insurers initiated marine insurance operations in the country. Subsequently, spurred by the Swadeshi movement, numerous Indian insurance companies were established. In 1912, the Life Insurance Companies Act and the Provident Fund Act were enacted to regulate the insurance sector, making it mandatory for premium-rate tables and valuations to be certified by an actuary.
A significant milestone occurred in 1938 with the introduction of the Insurance Act, the first legislation governing insurance companies' conduct in India. The Act, amended over time, remains in force, establishing the role of the Controller of Insurance appointed by the Government.
The nationalization of the life insurance business took place on September 1, 1956, leading to the formation of the Life Insurance Corporation of India (LIC), which held exclusive rights for life insurance operations until 1999. In 1972, the General Insurance Business Nationalisation Act was enacted, nationalizing the non-life insurance sector and establishing the General Insurance Corporation of India (GIC) and its subsidiaries.
In 1993, the Malhotra Committee was established to recommend industry changes, including the reintroduction of competition. Subsequently, in 1997, the Insurance Regulatory Authority (IRA) was founded. The pivotal moment came in 2000 with the enactment of the Insurance Regulatory and Development Authority of India (IRDAI) Act, establishing IRDAI as the statutory regulatory body for life, non-life, and health insurance.
In 2015, amendments to the Insurance Act introduced stipulations governing the definition and formation of insurance companies in India. Notably, Indian insurance companies must be Indian-owned and controlled, with foreign investors limited to a forty-nine percent equity stake. Furthermore, foreign insurance companies can engage in reinsurance through branches established in India, where reinsurance involves one insurer covering part of another insurer's risk for a mutually acceptable premium.
Presently, the Indian insurance landscape comprises 24 life insurance companies, including the public sector giant, Life Insurance Corporation (LIC) of India, and 23 private sector entities. Additionally, the postal department conducts life insurance operations through Postal Life Insurance, exempt from regulatory oversight under the Government of India. These developments reflect the dynamic evolution of India's insurance industry, marked by regulatory reforms and the entry of private players, shaping the sector into a robust and competitive landscape.