Indian Insurance Sector Development

Questions and Answers

What was the primary purpose of the amendments made in GIBNA, 1972 concerning GIC?

To transfer back the share capital of subsidiary companies to the Central Government (correct)

To enhance GIC's underwriting capabilities

To transfer the share capital of GIC to private entities

To link GIC back with its subsidiaries

What is the maximum foreign direct investment allowed in an Indian insurance company?

100%

There is no FDI allowed in insurance sector in India.

26% (correct)

74%

In which year was the General Insurance Corporation (GIC) established?

1975

1970

1972 (correct)

1980

How many public sector general insurance companies did GIC hold after its formation?

4 Signup and view all the answers

Which entity conducts examinations for individuals wishing to become insurance agents?

Life Insurance Council Signup and view all the answers

What is the primary function of the General Insurance Council regarding expense limits?

To fix limits for management expenses in general insurance Signup and view all the answers

What was one of the reasons for GIC being restricted to reinsurance operations?

To prevent capital flight from India Signup and view all the answers

Under which act was the General Insurance Corporation of India established?

General Insurance Business (Nationalisation) Act, 1972 Signup and view all the answers

What significant action took place with the passing of the Indian Life Assurance Companies Act, 1912?

First regulation of the life insurance business Signup and view all the answers

Which of the following was an outcome of the General Insurance Business (Nationalisation) Act, 1972?

Nationalisation of the general insurance business Signup and view all the answers

Who are members of the Insurance Association of India?

All insurance and provident societies in India Signup and view all the answers

What activity is specifically restricted for foreign investors in the insurance sector?

Investing more than 26% equity Signup and view all the answers

Which insurance company established by an Indian was noted as the first general insurance company?

Indian Mercantile Insurance Company Ltd. Signup and view all the answers

When did the General Insurance Corporation of India commence its business?

January 1, 1973 Signup and view all the answers

What role did the Central Legislature play in the regulation of the insurance industry in India?

It is empowered to regulate the insurance industry uniformly. Signup and view all the answers

What limitation does the Life Insurance Council impose on insurers?

Fixing expense limits for life insurance business Signup and view all the answers

What was the primary purpose of establishing GIC as a holding company?

To superintend, control, and carry on the business of general insurance Signup and view all the answers

Which function does GIC perform in regards to the setting up of standards in general insurance?

Assisting in the establishment of standards of conduct and sound practice Signup and view all the answers

What aspect of subsidiary companies does GIC oversee regarding expenses?

Controlling their expenses, including commissions Signup and view all the answers

Which directive regarding competition among subsidiaries is stated in the General Insurance Business (Nationalisation) Act?

GIC should promote competition to enhance service efficiency Signup and view all the answers

How did the formation of GIC affect the shares of Indian insurance companies?

Shares vested in GIC from the Central Government Signup and view all the answers

What does GIC advise acquiring companies about regarding funds?

Investment of funds to maximize growth potential Signup and view all the answers

What is one of the critical functions of GIC as a holding company?

Issuing directives related to general insurance conduct Signup and view all the answers

What was a new concept introduced with the formation of GIC in the public sector?

Holding company structure for insurance enterprises Signup and view all the answers

In which year was the Indian Mercantile Insurance Company Ltd. established?

1907 Signup and view all the answers

What legislation regulated non-life insurance in India for the first time?

Insurance Act, 1938 Signup and view all the answers

What does general insurance include according to the definitions provided?

Fire, marine, and miscellaneous insurance Signup and view all the answers

What was formed in September 1956 to manage life insurance in India?

Life Insurance Corporation Signup and view all the answers

Which act granted LIC the exclusive privilege to conduct life insurance business?

Life Insurance Corporation Act, 1956 Signup and view all the answers

When was the general insurance business in India nationalized?

January 1, 1973 Signup and view all the answers

How many insurance companies were taken over by the government during the nationalization of life insurance?

245 Signup and view all the answers

Which exception was allowed in the Life Insurance Corporation Act, 1956?

Companies could insure lives of persons residing outside India. Signup and view all the answers

What is the legal framework governing the insurance industry in India?

The insurance industry is regulated by the Union List in the Constitution. Signup and view all the answers

When was the first statutory measure to regulate life insurance in India enacted?

1912 Signup and view all the answers

Which company was the first general insurance company in India?

Triton Insurance Company Ltd. Signup and view all the answers

What significant difference existed in premium charges between Indians and British until the establishment of the Bombay Mutual Life Assurance Society?

Indians were charged an extra premium of up to 20%. Signup and view all the answers

Which insurance company was established first in India?

Bombay Life Assurance Company Signup and view all the answers

Why were other classes of insurance business excluded from the Indian Life Assurance Companies Act of 1912?

They were still in rudimentary form without a need for regulation. Signup and view all the answers

Which of the following life insurance companies was established in 1829?

Madras Equitable Life Insurance Society Signup and view all the answers

What aspect of the Indian Constitution is related to the insurance industry?

Union List provides legislative power to the Centre Signup and view all the answers

Study Notes

Development and Growth of Insurance Industry in India

Insurance is governed by the Central Legislature under the Union List, ensuring uniform regulation across India.
The evolution of life insurance in India began with the Oriental Life Insurance Company in 1818, followed by several other companies in the early 1800s.
A significant milestone was the passing of the Indian Life Assurance Companies Act in 1912, marking the first legislative measure to regulate life insurance.
Non-life insurance originated in the UK, with the first Indian general insurance company, Indian Mercantile Insurance Company, established in 1907.
The Insurance Act of 1938 was enacted to regulate both life and general insurance businesses comprehensively.

Nationalisation of the Insurance Business

On January 19, 1956, the management of life insurance was nationalised, forming the Life Insurance Corporation (LIC) of India in September of that year.
LIC was granted exclusive rights to conduct life insurance in India, except for policies covering individuals residing outside India.
General insurance was nationalised in 1973 under the General Insurance Business (Nationalisation) Act, 1972, initiating the GIC as the holding company for four subsidiaries.
Current FDI norms allow for foreign investment up to 26% in Indian insurance companies.

Insurance Association of India

The Insurance Association of India comprises all insurers and provident societies incorporated in India, with international firms as associate members.
The organization has two councils: the Life Insurance Council and the General Insurance Council, which oversee regulations and standards within their sectors.
The Life Insurance Council conducts examinations for prospective insurance agents and regulates expense limits for life insurance companies.
The General Insurance Council manages expense limits for general insurance companies to ensure financial discipline.

General Insurance Business (Nationalisation) Act, 1972 (GIBNA)

GIC was established as a government entity to supervise and manage general insurance operations effective January 1, 1973.
The Act mandates GIC to support subsidiary companies in setting standards, managing expenses, and advising on fund investments.
GIC encourages competition among its subsidiaries, fostering efficiency in customer service and insurance practices.
All shares of Indian insurance companies previously held by the government were transferred to GIC, integrating various companies under its umbrella.
GIC operates primarily in the reinsurance sector to prevent capital flight and promote domestic risk retention.

Key Milestones in Indian Insurance

The history of insurance regulation began with the establishment of life insurance companies in the early 19th century.
Major legislation like the Insurance Act of 1938 and GIBNA in 1972 shaped the modern insurance landscape in India.
Nationalisation efforts in the mid-20th century centralized insurance management, leading to the formation of significant bodies like LIC and GIC.

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Description

Explore the growth and evolution of the insurance industry in India, focusing on its constitutional framework and legislative powers. Understand how the Central government regulates this vital sector under the Union List, ensuring its development. This quiz will enhance your understanding of India's insurance landscape.