13.2 ndian onom
development purchasing government securities
Definition (G-Secs.) and equities of the big asset Public
In economic terms, anything used to cut down the Sector Undertakings (PSUs).
risk is known as insurance. But in familiar terms,
insurance is provided by an insurance company gic
which covers a person’s life (called life segment) In 1971, the government nationalised the private
or covers loss of assets, property (called non-life sector companies (107 Indian and foreign
or general segment). The insurance policies are companies) playing in the general insurance
purchased at fixed premiums. segment and a government company, the General
Insurance Corporation of India (GIC) was formed
insurance inDustry in 1972. The GIC started operation on January 1,
1973 with its four holding companies:
Insurance has a deep-rooted history in India.
(i) National Insurance Company Ltd.
It finds mention in the writings of Manu
(Manusmrithi), Yagnavalkya (Dharmasastra) (ii) New India Assurance Company Ltd.
and Kautilya (Arthasastra). The writings talk in (iii) Oriental Fire and Insurance Comany
terms of pooling of resources that could be re- Ltd.
distributed in times of calamities such as fire, (iv) United India Insurance Company Ltd.
floods, epidemics and famine. This was probably In the era of economic reforms, two major changes
a precursor to modern day insurance. Ancient took place in this area—
Indian history has preserved the earliest traces of
(i) In November 2000, the GIC was notified
insurance in the form of marine trade loans and
as the Indian Reinsurer1 (to be known as
carriers’ contracts. Insurance in India has evolved
over time heavily drawing from other countries
(England in particular). (ii) In March 2002 the GIC was withdrawn
from holding company status of the
lic four public sector general insurance
companies. Now these four companies
The life insurance business/industry in the
are directly owned by the Government of
country was nationalised by the Government of
India in 1956 and a fully government-owned
company, the Life Insurance Corporation of
India (LIC) was set up (at that time 245 Indian
and foreign companies were playing in the life The public sector insurance company, Agriculture
segment of insurance). Opening of private life Insurance Company of India Limited (AICIL) was
insurance companies was prohibited at that time. set up by the Government of India in December
The LIC was called an investment institution by 2002 (commenced its business in April 2003).
the government. This is a dedicated agri-insurance company and
The nationalisation was motivated by twin aims “to serve the needs of farmers better and to
objectives—first, to spread the message of life move towards a sustainable actuarial regime”.
insurance for greater social security and secondly, to
1. Publication Division, India 2002, (New Delhi:
mobilise people’s savings (collected as premiums) Government of India, 2003).
for nation building. The LIC had been the biggest 2. Ministry of Finance, Economic Survey 2002–03, (New
investor in the government’s procces of planned Delhi: Government of India, 2003).