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
                                                                       GIC Re).
     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.2
     India in 1956 and a fully government-owned
     company, the Life Insurance Corporation of
     India (LIC) was set up (at that time 245 Indian
                                                               aiciL
     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).