Milestones in history

The Insurance Act, 1938, was the first act of legislation brought into force to lay down a legal basis for the insurance industry in India , which was then characterised by private players.

• The Act, which set the initial ground rules for licensing and prudential norms, accounting requirements , prohibition of unfair trade practices and a whole host of issues, was subsequently modified so that it could continue to govern the life and non life sectors even after they were nationalised.
• As the wheel turns full circle and the sector is thrown open to private sector players once again, the Act is expected to go through another intensive revamp exercise to cater to the needs of a different milieu. It was the life sector that was first nationalised in 1956, at a time when there were 154 domestic insurers, 16 foreign insurers and 75 provident societies in operation. The public sector Life Insurance Corporation was set up in a monopolistic market in all life and pension segments.
• In 1968, the Tariff Advisory Committee (TAC) came into existence with the purpose of controlling tariffs in important segments of the non life sector, just four years before the latter was nationalised in 1972. In a socialistic set-up, this was considered a necessity as rate competition was regarded as an unhealthy trend.
• TAC exercised complete control over tariffs in the fire, motor, workers’ compensation, engineering, personal accident, marine cargo and marine hull segments, till, as an experimental measure, marine cargo tariffs were de-regulated in 1994.
  A fact little-known beyond the industry is hat controls had to be re-inforced within six months, as de-regulation kicked off a fierce tariff war amongst the four General Insurance Corporation (GIC) subsidiaries.
• With TAC likely to simplify tariff structures now, the degree of flexibility would be interesting to watch. The corporate sector is expecting this after liberalisation.
• To revert to history, the setting up of TAC was a prelude to the nationalisation of the general insurance sector in 1972.
• At that time there were 67 domestic operators and 40 foreign insurers in operation. GIC was set up with its four regional subsidiaries, also in a monopolistic environment.